1) What is the internal rate of return (IRR) for a project whose intitial after tax cost is $5,000,000 and it is expected to provide after tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3, and $2,300,000 in year 4 ?
2) A firm is evaluating a proposal that has an initial investment of $50,000 and has cash flows of $15,000 per year for 5 years. If the firms required return or cost is 15%, should it accept the project using the internal rate of return (IRR) as a decision criteria ?
3) What is the net present value (NPV) for a project whose cost of capital is 12% and its initial after tax cost is $5,000,000 and it is expected to provide after tax operating cash flows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and ($1,300,000) in year 4 ?© BrainMass Inc. brainmass.com October 24, 2018, 11:08 pm ad1c9bdddf
1) The IRR is the rate at which the present value of cash inflows = present value of cash outflows and so the NPV is zero. The IRR denotes the return that the project gives on the initial investment. We calculate IRR manually using trial and error or using the IRR ...
The solutions explains about IRR and NPV calculations and shows how to calculate NPV and IRR using excel
Caledonia: calculate payback period, NPV, IRR, and ranking conflict
I do not understand the NPV, or IRR. I have to answer these questions in an excel spreadsheet.
File is attached.
12. Caledonia is considering two additional mutually exclusive projects. The cash flows associated with these projects are as follows:
YEAR PROJECT A PROJECT B
0 −$100,000 −$100,000
1 32,000 0
2 32,000 0
3 32,000 0
4 32,000 0
5 32,000 $200,000
The required rate of return on these projects is 11 percent.
a. What is each project's payback period?
b. What is each project's net present value?
c. What is each project's internal rate of return?
d. What has caused the ranking conflict?
e. Which project should be accepted? Why?