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Calculating the NPV in the given case

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A project has annual cashflows of $10,500 for the next three years and then $20,000 each year for the following 12 years. The IRR for this project is 11%. It's WACC is 9%. What is the project NPV? (The IRR enables you to calculate the initial investment, because it's the discount rate at which the NPV of a project is equal to 0. The project's inflows can be evaluated at the IRR and the present value of these inflows must equal to the initial investment.)

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Solution Summary

This solution depicts the steps to estimate the NPV in the given case. It provides calculations of cash flow and present value in chart form in an Excel spreadsheet.

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Problem: A project has annual cashflows of $10,500 for the next three years and then $20,000 each year for the following 12 years. The IRR for this project is 11%. It's WACC is 9%. What is the project NPV? (The IRR enables you to calculate the initial investment, because it's the discount rate at which the NPV of a project is equal to 0. The project's inflows can be evaluated at the IRR ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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