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Calculating NPV and IRR for Investments

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An investment requires an outflow of $300,000 at time zero and another outflow of $60,000 at the end of the first year. Net after-tax inflows for years 2, 3 and 4 are zero. After tax inflows in years 5, 6 and 7 are $60,000, $400,000 and $400,000, respectively. The required rate of return is 17%. What is the Net Present Value of the investment?

Rupert Real Estate Company is planning to invest in a new development. The cost of the project will be $24 million and is expected to generate cash flows of $15,000,000, $12,850,000, and $5,450,000 over the next three years. The company's cost of capital is 20 percent. What is the internal rate of return on this project?

Munich Corp is looking to add a new machine at a cost of $5,133,250. The company expects this equipment will lead to cash flows of $918,822, $963,275, $947,250, $2,017,110, $2,212,960, and $2,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?

Given the following cash flows for a capital project, calculate the IRR.
Year
0 1 2 3 4 5
Cash Flows ($60,468) $13,749 $13,425 $21,549 $9,580 $5,958

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Solution Summary

The solution depicts the steps to calculate NPV and IRR values in the given cases with step-by-step calculations and all formulas shown.

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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