Question

JoePa Industries recently bought a new plant for $15 million and expects cash flows generated from the investment in the next four years to be: $10 million, $12 million, $15 million, and $10 million. Using a discount rate of 8.0%, calculate the company’s NPV (rounded to the nearest million).

$33 million

$24 million

$44 million

$14 million

$13 million

Initech invests in a new plant for $150,000. The investment is expected to generate cash flows in the next 3 years of: $55,000, $75,000, and $95,000. Calculate the IRR of the project.

12.0%

19.5%

21.1%

15.6%

4.0%

Answer 1

Year CFYear ICF 0 $(15)0 1-15 1 $ 101 10 2 $ 122 12 3 $ 15 4 $ 10 NPV $ 24 NPV =NPV(8%,B3.B6)+B2

Year CF Year ICF 0 $(150,000)| O -150000 1 $ 55,000 1 55000 2 $ 75,000 2 75000 3 $ 95,000 3 195000 IRR 21.1% IRR IEIRR(B2:B5) !