In: Finance
11. You would like to develop an office building. Your analysts forecast that it will cost you $1,000,000 immediately (time 0), and it will cost you $500,000 in one year (time 1). They forecast you can sell the building for $2,400,000 in two years (time 2). If your discount rate is i= 25%, what is the net present value of this investment? (Answer is NOT 532,000, I think its 136,000)
12. What is the IRR of the project in question 11? (if you are using an ordinary calculator, it is a quadratic equation; if you are using a financial calculator, use the CF method). (Answer is NOT 54.67, I think its 31.92%)
11.Net present value can be solved using a financial calculator. The steps to solve on the financial calculator:
Net present value at 25% discount rate is $136,000.
12.Internal rate of return can be calculated using a financial calculator by inputting the below:
The IRR of the project is 31.92%.