A project that provides annual cash flows of $2,500 for 7 years costs $9,400 today. ...

A project that provides annual cash flows of $2,500 for 7 years costs $9,400 today.

Required:
(a)	If the required return is 9 percent, what is the NPV for this project?

(b)	Determine the IRR for this project.

rev: 09_18_2012, 09_26_2017_QC_C

Expert Solution

a)

	9.0000%
Cash flows	Year	Discounted CF
(9,400.00)	0	-9400.00
2,500.00	1	2293.58
2,500.00	2	2104.20
2,500.00	3	1930.46
2,500.00	4	1771.06
2,500.00	5	1624.83
2,500.00	6	1490.67
2,500.00	7	1367.59

NPV = 3,182.38

Discounted cash flow = cash flow/(1+rate)^n

b) IRR = 18.48%

use IRR function in Excel

jeff jeffy answered 2 years ago

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