Question

In: Finance

On Monday, Eagle Manufacturing lost a portion of its planning and financial data when both its...

  1. On Monday, Eagle Manufacturing lost a portion of its planning and financial data when both its main and backup servers crashed. The company's CFO remembers that the IRR of project Alpha is 13%, But he can't recall how much Eagle originally invested in the project nor the project's NPV. However, he found a note that detailed the annual net cash flows expected to be generated by Project Alpha. They are:

Year 1 $2,000,000

Year 2 $3,750,000

Year 3 $3,750,000

Year 4 $3,750,000

The level of risk exhibited by Project Alpha is the same as that exhibited by the company's average project. The WACC for Eagle Manufacturing is 10%.

Given the data, what is Alpha's initial investment and NPV ?

Solutions

Expert Solution

Since IRR equates the cash ouflows to cash inflows, Initial investment here would be equal to the sum of present values of cash inflows.

jeff jeffy answered 1 year ago
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