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    NPV, IRR and Profitability Index

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    Calculate the NPV, IRR and Profitability Index for the cash flows listed below using a discount rate of 10%: (show your calculations)

    0 $-275,000
    1 $125,000
    2 $75,000
    3 $100,000
    4 $50,000

    Should the project be accepted? Why?

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    Solution Preview

    Problem: Calculate the NPV, IRR and Profitability Index for the cash flows listed below using a discount rate of 10%: (show your calculations)

    0 $-275,000
    1 $125,000
    2 $75,000
    3 $100,000
    4 $50,000

    Should the project be accepted? Why?

    Solution:
    NPV = PV of cash inflows - initial investment
    PV of cash inflows = 125,000/1.1 + 75,000/1.1^2 + ...

    Solution Summary

    The solution explains how to calculate the NPV, IRR and Profitability Index for the given cash flows

    $2.19

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