# NPV, IRR and Profitability Index

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

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