Question

A project has annual cash flows of $8,000 for the next 10 years and then $8,500 each year for the following 10 years. The IRR of this 20-year project is 9.05%. If the firm's WACC is 8%, what is the project's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Total NPV of cash flows = $80,099

Formula & Calculation are given below

Note :- IRR is not relavent for calculation of NPV hence ignored

	Cash Flows	Discounted Cash Flows
Year	WACC	8%
1	8000	7,407
2	8000	6,859
3	8000	6,351
4	8000	5,880
5	8000	5,445
6	8000	5,041
7	8000	4,668
8	8000	4,322
9	8000	4,002
10	8000	3,706
11	8500	3,646
12	8500	3,375
13	8500	3,125
14	8500	2,894
15	8500	2,680
16	8500	2,481
17	8500	2,297
18	8500	2,127
19	8500	1,970
20	8500	1,824
NPV		80,099

	Cash Flows	Discounted Cash Flows
Year	WACC	0.08
1	8000	=B3/(1+C$2)^A3
2	8000	=B4/(1+C$2)^A4
3	8000	=B5/(1+C$2)^A5
4	8000	=B6/(1+C$2)^A6
5	8000	=B7/(1+C$2)^A7
6	8000	=B8/(1+C$2)^A8
7	8000	=B9/(1+C$2)^A9
8	8000	=B10/(1+C$2)^A10
9	8000	=B11/(1+C$2)^A11
10	8000	=B12/(1+C$2)^A12
11	8500	=B13/(1+C$2)^A13
12	8500	=B14/(1+C$2)^A14
13	8500	=B15/(1+C$2)^A15
14	8500	=B16/(1+C$2)^A16
15	8500	=B17/(1+C$2)^A17
16	8500	=B18/(1+C$2)^A18
17	8500	=B19/(1+C$2)^A19
18	8500	=B20/(1+C$2)^A20
19	8500	=B21/(1+C$2)^A21
20	8500	=B22/(1+C$2)^A22
NPV		=SUM(C3:C22)