Question

A project has the following cash flows: Year Cash Flow 0 $ 71,500 1 –51,000 2 –28,800 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.) Internal rate of return 8.4 % What is the NPV of this project if the required return is 5 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.) Net present value $ 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.) Net present value $ What is the NPV of the project if the required return is 23 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.) Net present value

Answer 1

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

• •   Press the CF button.
• •   CF0= $71,500.
• •   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 8.46%.

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

• •   Press the CF button.
• •   CF0= $71,500
• •   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 is 5%.
• •   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 -$3,193.88.

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

• •   Press the CF button.
• •   CF0= $71,500
• •   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 is 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 -$8,300.

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

• •   Press the CF button.
• •   CF0= $71,500
• •   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 is 23%.
• •   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 $11,000.30.

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