In: Finance
A project that provides annual cash flows of $20,000 for 5 years
costs $64,000 today.
a. If the required return is 14 percent, what is the NPV for this
project?
b. Determine the IRR for this project.
a
Year | Cash flow | × factor@ 14.00% | Present value |
0 | $ (64,000.00) | 1.0000 | $ (64,000.00) |
1 | $ 20,000.00 | 0.8772 | $ 17,543.86 |
2 | $ 20,000.00 | 0.7695 | $ 15,389.35 |
3 | $ 20,000.00 | 0.6750 | $ 13,499.43 |
4 | $ 20,000.00 | 0.5921 | $ 11,841.61 |
5 | $ 20,000.00 | 0.5194 | $ 10,387.37 |
NPV | 3.4331 | $ 4,661.62 |
NPV is 4,661.62
b
Year | Cash flow | × factor@ 16.99% | Present value |
0 | $ (64,000.00) | 1.0000 | $ (64,000.00) |
1 | $ 20,000.00 | 0.8548 | $ 17,095.32 |
2 | $ 20,000.00 | 0.7306 | $ 14,612.49 |
3 | $ 20,000.00 | 0.6245 | $ 12,490.26 |
4 | $ 20,000.00 | 0.5338 | $ 10,676.25 |
5 | $ 20,000.00 | 0.4563 | $ 9,125.69 |
NPV | 3.2000 | $ 0.00 |
IRR is 16.99%
please rate.