Question

USLUHOPO Do Yuan opens a lab. The lab has an initial cost of $100.000 Expected net cash flow is $24,000 in the first year growing by 15% per year Net cash flow is revenue less expenses Assume the lab has a 6 year life and there is no scrap value for the lab! If the time discount rate is 8%, what is the NPV of the lab? What is its IRR? The NPV is $31,740, the IRR IS 60% The NPV is $28,568 the IRR is 80% The NPV is $41,976, the IRR IS 80% The NPV is $27.600 the RRS 8.0% The NPV is $26.479, the IRR is 16.7%

Answer 1

	Ans: The NPV is $26,479, the IRR is 16.7% Dr Yuann
	NPV= PV of Inflows - PV of Outflows
	PV of Outlows= $ 100000 * 1	100000
	PV of Inflows:
Year	Inflows	PVF @ 8 %	PVAF
1	$                                                                                        24,000.00	0.9259	$    22,221.60
2	$                                                                                        27,600.00	0.85733	$    23,662.31
3	$                                                                                        31,740.00	0.79383	$    25,196.16
4	$                                                                                        36,501.00	0.73503	$    26,829.33
5	$                                                                                        41,976.15	0.68058	$    28,568.13
6	$                                                                                        48,272.57	0.63017	$    30,419.93
	Total		$ 156,897.46
	NPV
	($ 126479 - $ 100000)	$         26,479.00
	IRR= That rate where PV of Inflows - PV of Autflows
	PV of Inflows:
Year	Inflows	PVF @ 8 %	PVAF	PVF @ 16 %	PVAF
1	$                                                                                        24,000.00	0.9259	$    22,221.60	0.8621	$       20,690.40
2	$                                                                                        27,600.00	0.85733	$    23,662.31	0.7432	$       20,512.32
3	$                                                                                        31,740.00	0.79383	$    25,196.16	0.64066	$       20,334.55
4	$                                                                                        36,501.00	0.73503	$    26,829.33	0.55229	$       20,159.14
5	$                                                                                        41,976.15	0.68058	$    28,568.13	0.47611	$       19,985.26
6	$                                                                                        48,272.57	0.63017	$    30,419.93	0.41044	$       19,812.99
	Total		$ 156,897.46		$     121,494.66
	IRR = 16. 7 %

Option E is correct