Question

In: Finance

annual cash flow, -500,000 125,000 150,000 175,000 200,000 250,000 What is the IRR of the investment

annual cash flow,

-500,000
125,000
150,000
175,000
200,000
250,000

What is the IRR of the investment

Solutions

Expert Solution

Ans 20.53%

Year Project Cash Flows (i) DF@ 12% DF@ 12% (ii) PV of Project A ( (i) * (ii) ) DF@ 22% (iii) PV of Project A ( (i) * (iii) )
0 -500000 1 1                (5,00,000.00) 1     (5,00,000.00)
1 125000 1/((1+12%)^1) 0.893                  1,11,607.14 0.820      1,02,459.02
2 150000 1/((1+12%)^2) 0.797                  1,19,579.08 0.672      1,00,779.36
3 175000 1/((1+12%)^3) 0.712                  1,24,561.54 0.551          96,373.71
4 200000 1/((1+12%)^4) 0.636                  1,27,103.62 0.451          90,279.82
5 250000 1/((1+12%)^5) 0.567                  1,41,856.71 0.370          92,499.81
20.53% NPV                  1,24,708.10 NPV        (17,608.29)
IRR = Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
12% + 124708.1 / (124708.1 + 17608.29)*10%
20.53%

jeff jeffy answered 3 months ago
Next > < Previous

Related Solutions

annual cash flow, -500,000 125,000 150,000 175,000 200,000 250,000 What is the Modified IRR (MIRR), with...
annual cash flow, -500,000 125,000 150,000 175,000 200,000 250,000 What is the Modified IRR (MIRR), with a reinvestment rate equal to the WACC of 8%?
Suppose you are considering an investment that will generate equal annual cash flow of $200,000 over...
Suppose you are considering an investment that will generate equal annual cash flow of $200,000 over its 10-year life, resulting in an IRR of 14% and a Profitability index of 1.05. What is this investment's NVP?
Year Cash flow (€) 0 - Investment -? 1 150,000 2 150,000 3 4 150,000 ?...
Year Cash flow (€) 0 - Investment -? 1 150,000 2 150,000 3 4 150,000 ? Some years ago X AG paid €15’000 for a vacant lot with planning permission. The plot could easily be sold today for 10 times that amount. X AG has however a project in mind that would occupy the plot and require investment of €200,000 but generate positive cash flows of €150,000 for the next 4 years. X AG will be able to sell the...
1. Suppose that a company has a Free Cash Flow of $150,000 in one year, $200,000...
1. Suppose that a company has a Free Cash Flow of $150,000 in one year, $200,000 in 2 years and then FCFs start growing at a constant rate of 5%. The WACC used as a discount rate for FCFs is 8%. The company has $ 18,000 in long-term debt and it has 40,000 shares outstanding. Find current stock price using FCF model. 2. Let's take a look at a different company. Free cash flows are usually volatile when a company...
What is the approximate IRR for a project that cost $200,000 and provide cash inflows of...
What is the approximate IRR for a project that cost $200,000 and provide cash inflows of $40,000 for 6 years. Please do not use excel
Compute the IRR on the following cash flow streams: a. An initial investment of $22,482 followed...
Compute the IRR on the following cash flow streams: a. An initial investment of $22,482 followed by a single cash flow of $32,290 in year 6. (Round answer to 2 decimal places, e.g. 5.25%.) IRR % ____ b. An initial investment of $1,229,844 followed by a single cash flow of $1,864,300 in year 4. (Round answer to 2 decimal places, e.g. 5.25%.) IRR % _____ c. An initial investment of $1,749,912 followed by cash flows of $1,585,900 and $1,108,200 in...
Suppose that an existing machine generates a monthly cash flow of $150,000. An investment of $6,000,000...
Suppose that an existing machine generates a monthly cash flow of $150,000. An investment of $6,000,000 will increase the cash flow to $200,000 per month. The relevant monthly discount rate is1%. Should you invest? • Let’s use the incremental method:                         Period 0.                   Periods 1… • Project 1.     0.                                 150,000 • Project 2.     -6,000,000                  200,000 Diff 2-1.          -6,000,000.                   50,000 Incremental NPV = -6000000+ 50000/0.01= -$1,000,000 how come incremental NPV uses 1% rather than (1+r)
An investment is expected to generate annual cash flows forever. The first annual cash flow is...
An investment is expected to generate annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate annually. We know that the cash flow expected in 3 years from today is expected to be $9,000 and the cash flow expected in 7 years from today is expected to be $10,000. What is the cash flow expected to be in 5 years from today?
An investment is expected to generate annual cash flows forever. The first annual cash flow is...
An investment is expected to generate annual cash flows forever. The first annual cash flow is expected in 1 year and all subsequent annual cash flows are expected to grow at a constant rate annually. We know that the cash flow expected in 2 year(s) from today is expected to be 1,860 dollars and the cash flow expected in 8 years from today is expected to be 3,140 dollars. What is the cash flow expected to be in 5 years...
A project requires an initial investment of $200,000 and expects to produce a cash flow before...
A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of $120,000 per year for two years (i.e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 21 percent. The assets will depreciate using the MACRS 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax situation is such that it can use all...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT