There is a new road project which is expected to be finished in 4 years. This...

There is a new road project which is expected to be finished in 4 years. This project has an initial cost of 1 million$. After the initial cost is paid, the road project is expected to provide 250,000$ in year 1, 300,000 in year 2, 320,000 in year 3 and 450,000 in year 4. It is known that the internal rate of return in this project 10.96%. What is the net present value?

Expert Solution

NPV is the difference between cash outlows and discounted cash inflows. IRR is the discount rate where NPV is 0 or very close to 0.

Year	Cash flow	PV factor@ 10.96%	Discounted cash flow
0	(1,000,000)	1	(1,000,000)
1	250,000	0.901225667	225,306
2	300,000	0.812207703	243,662
3	320,000	0.731982429	234,234
4	450,000	0.659681352	296,857
			60

PV factor = 1/(1+r)^t

jeff jeffy answered 2 years ago

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