Question

6b3

Green Landscaping, Inc. is using net present value (NPV) when evaluating projects. Green Landscaping’s cost of capital is 10.30 percent. What is the NPV of a project if the initial costs are $2,106,000 and the project life is estimated as 10 years? The project will produce the same after-tax cash inflows of $512,558 per year at the end of the year.

Round the answer to two decimal places.

Your Answer:

6c3

Find the internal rate of return (IRR) for the following series of future cash flows. The initial outlay is $680,025.

Year 1: 189,200

Year 2: 141,300

Year 3: 192,700

Year 4: 164,900

Year 5: 187,000

Round the answer to two decimal places in percentage form. (Write the percentage sign in the "units" box)

You should use Excel or financial calculator.

Answer 1

The NPV is computed as shown below:

Step 1: Press 2nd key and then press CF.

Step 2: Plug - 2,106,000 in CF0. Then press down arrow key.

Step 3: Plug 512,558 in C01. Then press down arrow key and press 10 in F01. Then again press down arrow key.

Step 4: Now press NPV key, it will ask for I. Please enter 10.30 in it. Now finally press down arrow key and then press CPT.

It will give NPV equal to $ 1,003,263.97

IRR is computed as follows:

Step 1: Press 2nd key and then press CF.

Step 2: Plug - 680,025 in CF0. Then press down arrow key.

Step 3: Plug 189,200 in C01. Then press down arrow key and press 1 in F01. Then again press down arrow key.

Step 4: Plug 141,300 in C02. Then press down arrow key and press 1 in F02. Then again press down arrow key.

Step 5: Plug 192,700 in C03. Then press down arrow key and press 1 in F03. Then again press down arrow key.

Step 6: Plug 164,900 in C04. Then press down arrow key and press 1 in F04.

Step 7: Plug 187,000 in C05. Then press down arrow key and press 1 in F05.

Step 8: Now press IRR key and then press CPT key. It will give IRR equal to 8.98% Approximately

Feel free to ask in case of any query relating to this question