A capital project has an initial investment of $100,000 and cash flows in years 1-6 of...

A capital project has an initial investment of $100,000 and cash flows in years 1-6 of $25,000, $15,000, $50,000, $10,000, $10,000, and $60,000, respectively. Given a 15 percent cost of capital,

(a) compute the net present value.
(b) compute the internal rate of return
(c) should the project be accepted? Why or why not?

Solutions

Expert Solution

i	ii	iii	iv=ii*iii
Year	Cash flow	PVIF @15%	Present value
0	-100000	1.0000	(100,000.00)
1	25000	0.8696	21,739.13
2	15000	0.7561	11,342.16
3	50000	0.6575	32,875.81
4	10000	0.5718	5,717.53
5	10000	0.4972	4,971.77
6	60000	0.4323	25,939.66
			2,586.05

NPV =			2,586.05
IRR =	16%		16%
c)	Yes, project should be accepted

jeff jeffy answered 1 year ago

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