Question

A project has the following cash flows: Year Cash Flow 0 $ 42,000 1 – 21,000 2 – 32,000 What is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16)) IRR % What is the NPV of this project, if the required return is 12 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $ What is the NPV of the project if the required return is 0 percent? (Negative amount should be indicated by a minus sign.) NPV $ What is the NPV of the project if the required return is 24 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $

Answer 1

1. Internal rate of return is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $42,000.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the last cash flow cash flow, press the IRR and CPT button to get the IRR of the project.

The IRR of project is 15.80%.

2. Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $42,000.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the third cash flow cash flow, press the NPV button and enter the required return of 12%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is -$2,260.20.  

3. Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $42,000.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the third cash flow cash flow, press the NPV button and enter the required return of 0%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is -$11,000.

4. Net present value is calculated using a financial calculator by inputting the below:

• Press the CF button.
• CF0= $42,000.
• Cash flow for each year should be entered.
• Press Enter and down arrow after inputting each cash flow.
• After entering the third cash flow cash flow, press the NPV button and enter the required return of 24%.
• Press enter after that. Press the down arrow and CPT buttons to get the net present value.

The net present value of cash flows is $4,252.86.

In case of any query, kindly comment on the solution.