A project has the following cash flows: Year Cash Flow 0 $ 40,000 1 – 19,000...

A project has the following cash flows: Year Cash Flow 0 $ 40,000 1 – 19,000 2 – 30,000 What is the IRR for this project? What is the NPV of this project, if the required return is 11 percent? What is the NPV of the project if the required return is 0 percent? What is the NPV of the project if the required return is 22 percent?

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Expert Solution


Calculation of IRR of the project
Year	Cash flow
0	$40,000.00
1	-$19,000.00
2	-$30,000.00
At IRR , the NPV of the project is equal to zero.
IRR =	13.55%

Calculation of NPV of the project if the required return is 11 percent
Year	Cash flow	Discount Factor @ 11%	Present Values
0	$40,000.00	1	$40,000.00
1	-$19,000.00	0.900901	-$17,117.12
2	-$30,000.00	0.811622	-$24,348.67
NPV of the project			-$1,465.79

Calculation of NPV of the project if the required return is 0 percent
Year	Cash flow	Discount Factor @ 0%	Present Values
0	$40,000.00	1	$40,000.00
1	-$19,000.00	1	-$19,000.00
2	-$30,000.00	1	-$30,000.00
NPV of the project			-$9,000.00

Calculation of NPV of the project if the required return is 22 percent
Year	Cash flow	Discount Factor @ 22%	Present Values
0	$40,000.00	1	$40,000.00
1	-$19,000.00	0.819672	-$15,573.77
2	-$30,000.00	0.671862	-$20,155.87
NPV of the project			$4,270.36

jeff jeffy answered 1 year ago

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