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