A project that provides annual cash flows of $10,500 for 8 years costs $50,387 today. a....

A project that provides annual cash flows of $10,500 for 8 years costs $50,387 today. a. If the required return is 19 percent, what is the NPV for this project? b. Determine the IRR for this project.

Expert Solution

Ans 1	computation of NPV

	We have to use the financial calculator to solve for the present value of cash inflow
	put in calculator

	FV		0
	PMT		-10500
	I		19%
	N		8

	Compute PV	$41,520.84

i	Present value of cash inflow =		$ 41,520.84
ii	Present value of cash outflow =		$ 50,387.00

iii=i-ii	NPV=			($8,866.16)
	Ans =			($8,866.16)


Ans 2	We have to use financial calculator to solve for IRR
	Put in calculator

	FV		0
	PV		-50387
	PMT		10500
	N		8

	Compute I	13.00%

	IRR =		13.00%

jeff jeffy answered 2 years ago

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