Question

In: Finance

Given the cash-flows in the table, what is the NPV of project A?

1.

Project A

Year

Cash Flow

0

-$107

1

$69

2

$80

3

$120

WACC =

6.19%

Given the cash-flows in the table, what is the NPV of project A?  
State your answer to the nearest penny.
Give just the number with no dollar sign (e.g., 3.26)

If the NPV is negative include the - sign (e.g. -4.28)

2.

Using the information in the table, what is the IRR for Project A?

Cash Flow
Year Project A
0 ($175)
1 $80
2 $75
3 $50
WACC = 5.00%

Solutions

Expert Solution

a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=69/1.0619+80/1.0619^2+120/1.0619^3

=236.14

NPV=Present value of inflows-Present value of outflows

=236.14-107

=129.14(Approx)

b.Let irr be x%
At irr,present value of inflows=present value of outflows.

175=80/1.0x+75/1.0x^2+50/1.0x^3

Hence x=irr=9.05%(APPROX)

jeff jeffy answered 1 year ago
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