Question

A project has the following cash flows:

Year	Cash Flow
0	$	59,000
1	–	34,000
2	–	39,000

a.	What is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	What is the NPV of this project if the required return is 12 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c.	What is the NPV of the project if the required return is 0 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
d.	What is the NPV of the project if the required return is 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

Answer 1

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

• Press the CF button.
• CF0= $59,000.
• 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 15.07%.

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

• Press the CF button.
• CF0= $59,000.
• 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 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 -$2,447.70.

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

• Press the CF button.
• CF0= $59,000.
• 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 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 -$14,000.

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

• Press the CF button.
• CF0= $59,000.
• 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 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 $6,216.44.

In case of any query, kindly comment on the solution