Question

A project has annual cash flows of $8,000 for the next 10 years and then $7,500 each year for the following 10 years. The IRR of this 20-year project is 8.15%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent. $

Answer 1

For calculating IRR, we need Initial Investment which is not given in this question

Also at IRR, Present Value of Cash Inflow = Cash Outfolw

Year	Cash Flows	PV Factor @ 8.15%	PV of Cash Flows
1	8,000	0.9246	7,397.13
2	8,000	0.8550	6,839.70
3	8,000	0.7905	6,324.27
4	8,000	0.7310	5,847.68
5	8,000	0.6759	5,407.01
6	8,000	0.6249	4,999.55
7	8,000	0.5778	4,622.79
8	8,000	0.5343	4,274.43
9	8,000	0.4940	3,952.31
10	8,000	0.4568	3,654.47
11	7,500	0.4224	3,167.89
12	7,500	0.3906	2,929.16
13	7,500	0.3611	2,708.42
14	7,500	0.3339	2,504.32
15	7,500	0.3087	2,315.60
16	7,500	0.2855	2,141.10
17	7,500	0.2640	1,979.75
18	7,500	0.2441	1,830.56
19	7,500	0.2257	1,692.61
20	7,500	0.2087	1,565.06
Present Value of Cash Inflows	76,153.82

Therefore, Initial Investment = $76,153.82

Now, NPV = Present Value of Cash Inflow - Initial Investment

Year	Cash Flows	PV Factor @ 8%	PV of Cash Flows
0	-76,153.82	1	-76,153.82
1	8,000.00	0.9259	7,407.41
2	8,000.00	0.8573	6,858.71
3	8,000.00	0.7938	6,350.66
4	8,000.00	0.7350	5,880.24
5	8,000.00	0.6806	5,444.67
6	8,000.00	0.6302	5,041.36
7	8,000.00	0.5835	4,667.92
8	8,000.00	0.5403	4,322.15
9	8,000.00	0.5002	4,001.99
10	8,000.00	0.4632	3,705.55
11	7,500.00	0.4289	3,216.62
12	7,500.00	0.3971	2,978.35
13	7,500.00	0.3677	2,757.73
14	7,500.00	0.3405	2,553.46
15	7,500.00	0.3152	2,364.31
16	7,500.00	0.2919	2,189.18
17	7,500.00	0.2703	2,027.02
18	7,500.00	0.2502	1,876.87
19	7,500.00	0.2317	1,737.84
20	7,500.00	0.2145	1,609.11
NPV	837.33

Therefore, NPV = $873.33