Question

MATS Company is considering an investment of $35,000, which produces the following inflows:

Year                                                                                       Cash Flow

1 .....................                                                                 $16,000

2 .....................                                                                  15,000

3 .....................                                                                  12,000

a. Determine the net present value of the project based on 8% discount rate.

b. Determine the net present value of the project based on a 10% discount rate.

c. Determine the net present value of the project based on a 15% discount rate

d. Calculate IRR

Include financial calculator steps, including the keys pressed on the calculator to solve each step.

Answer 1

Answer of Part a: Year Cash Flow PV Factor PV of Cash Flow 1 16000 0.9259 14814.81 21 15000 0.8573 12860.08 3 12000 0.7938 9525.99 PV Cash Inflow 37200.88 NPV = Cash Inflow - Cash outflow NPV = $37,200.88 - $35,000 NPV = $2,200.88 Answer of Part b: Year Cash Flow PV Factor Pv of Cash Flow 1 16000 0.9091 14545.45 2 15000 0.8264 12396.69 3 12000 0.7513 9015.78 PV Cash Inflow 35957.93 NPV = Cash Inflow - Cash Outflow NPV = $35,957.93 - $35,000 NPV = $957.93 Answer of Part : Year Cash Flow PV Factor PV Cash Flow 1 16000 0.8696 13913.04 15000 0.7561 11342.16 3 12000 0.6575 7890.19 PV Cash Inflow 33145.39 WN NPV = Cash Inflow - Cash Outflow NPV = $33,145.39 - $35,000 NPV = -$1,854.61

B7 X ✓ fix =IRR(B3:36) с A B 1 Answer of Part d: 2 Year Cash Flow 3 0 -35000 4 1 16000 5 2 15000 6 12000 7 IRR 11.62% 8 3