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NPV and IRR

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NPV/IRR. Growth Enterprises believes its latest project, which will cost $80,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of this year will be $5,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 5 percent.

a. If the discount rate for this project is 10 percent, what is the project NPV?

b. What is the project IRR?

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The solution explains the calculation of NPV and IRR for a project.

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a. This is a growing perpetuity. The present value of a growing perpetuity is given as
Cash flow at end of the ...

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