Question

A project has annual cash flows of $3,500 for the next 10 years and then $10,500 each year for the following 10 years. The IRR of this 20-year project is 13.44%. If the firm's WACC is 11%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

IRR means the rate at which present value of cash inflow is equal to Initial investment.
Hence using IRR rate we can calculate initial investment amount
	Year	Cash Flow	PV Factor	PV Of Cash Flow
	a	b	c=1/1.1344^a	d=b*c
	1	$           3,500	0.88152	$             3,085.33
	2	$           3,500	0.77708	$             2,719.79
	3	$           3,500	0.68502	$             2,397.56
	4	$           3,500	0.60386	$             2,113.50
	5	$           3,500	0.53232	$             1,863.10
	6	$           3,500	0.46925	$             1,642.37
	7	$           3,500	0.41365	$             1,447.79
	8	$           3,500	0.36464	$             1,276.26
	9	$           3,500	0.32144	$             1,125.05
	10	$           3,500	0.28336	$                 991.76
	11	$         10,500	0.24979	$             2,622.77
	12	$         10,500	0.22019	$             2,312.04
	13	$         10,500	0.19411	$             2,038.11
	14	$         10,500	0.17111	$             1,796.64
	15	$         10,500	0.15084	$             1,583.78
	16	$         10,500	0.13297	$             1,396.14
	17	$         10,500	0.11721	$             1,230.73
	18	$         10,500	0.10333	$             1,084.92
	19	$         10,500	0.09108	$                 956.38
	20	$         10,500	0.08029	$                 843.07
	Initial Investment			$           34,527.11
	Calculation of NPV using 11% rate
	Year	Cash Flow	PV Factor	PV Of Cash Flow
	a	b	c=1/1.11^a	d=b*c
	0	$ -34,527.11	1.00000	$         -34,527.11
	1	$           3,500	0.90090	$             3,153.15
	2	$           3,500	0.81162	$             2,840.68
	3	$           3,500	0.73119	$             2,559.17
	4	$           3,500	0.65873	$             2,305.56
	5	$           3,500	0.59345	$             2,077.08
	6	$           3,500	0.53464	$             1,871.24
	7	$           3,500	0.48166	$             1,685.80
	8	$           3,500	0.43393	$             1,518.74
	9	$           3,500	0.39092	$             1,368.24
	10	$           3,500	0.35218	$             1,232.65
	11	$         10,500	0.31728	$             3,331.47
	12	$         10,500	0.28584	$             3,001.33
	13	$         10,500	0.25751	$             2,703.90
	14	$         10,500	0.23199	$             2,435.95
	15	$         10,500	0.20900	$             2,194.55
	16	$         10,500	0.18829	$             1,977.07
	17	$         10,500	0.16963	$             1,781.14
	18	$         10,500	0.15282	$             1,604.63
	19	$         10,500	0.13768	$             1,445.62
	20	$         10,500	0.12403	$             1,302.36
		NPV		$           42,390.32