Question

A project has the following cash flows: Year Cash Flow $112,000 – 67,000 - 57,000 1 N- a. What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV of this project if the required return is 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the NPV of the project if the required return is o percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What is the NPV of the project if the required return is 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Internal rate of return b. Net present value Net present value d. Net present value

Answer 1

a
Project
IRR is the rate at which NPV =0
IRR	0.072666224
Year	0	1	2
Cash flow stream	112000	-67000	-57000
Discounting factor	1	1.072666	1.150613
Discounted cash flows project	112000	-62461.2	-49538.8
NPV = Sum of discounted cash flows
NPV Project =	-0.00021399
Where
Discounting factor =	(1 + IRR)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor
IRR=	7.27%
b
Project
Discount rate	0.1
Year	0	1	2
Cash flow stream	112000	-67000	-57000
Discounting factor	100.00%	1.1	1.21
Discounted cash flows project	112000	-60909.1	-47107.4
NPV = Sum of discounted cash flows
NPV Project =	3983.47
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

c
Project
Discount rate	0
Year	0	1	2
Cash flow stream	112000	-67000	-57000
Discounting factor	1	1	1
Discounted cash flows project	112000	-67000	-57000
NPV = Sum of discounted cash flows
NPV Project =	-12000
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

d
Project
Discount rate	0.24
Year	0	1	2
Cash flow stream	112000	-67000	-57000
Discounting factor	1	1.24	1.5376
Discounted cash flows project	112000	-54032.3	-37070.8
NPV = Sum of discounted cash flows
NPV Project =	20896.98
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor