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Cost of capital is 12%. Its expects aftertax cash flows (including the tax shield from depreciation) for the next 5 years are:
Year 1 $ 10,000
Year 2 20,000
Year 3 30,000
Year 4 20,000
Year 5 5,000

a) Calculated the NPV.
b) calculate the IRR
c) Would you accept the project?

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Solution Summary

This solution is comprised of a detailed explanation to calculate the NPV, IRR, and answer whether to accept the project or not.

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Your firm has an opportunity to make an investment of $50,000
Cost of capital is 12%. Its expects aftertax cash flows (including the tax shield from depreciation) for the next 5 years are:
Year 1 $ 10,000
Year 2 20,000
Year 3 30,000
Year 4 20,000
Year 5 5,000

a) Calculated the NPV.

NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted at ...

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