Question

A project has annual cash flows of $7,000 for the next 10 years and then $8,500 each year for the following 10 years. The IRR of this 20-year project is 13.37%. If the firm's WACC is 10%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

Answer 1

Year	Amount		[email protected]%		PV
0
1	$ 7,000.00		0.88207		$    6,174.47
2	$ 7,000.00		0.77804		$    5,446.30
3	$ 7,000.00		0.68629		$    4,804.01
4	$ 7,000.00		0.60535		$    4,237.46
5	$ 7,000.00		0.53396		$    3,737.72
6	$ 7,000.00		0.47099		$    3,296.93
7	$ 7,000.00		0.41544		$    2,908.11
8	$ 7,000.00		0.36645		$    2,565.15
9	$ 7,000.00		0.32323		$    2,262.64
10	$ 7,000.00		0.28511		$    1,995.80
11	$ 8,500.00		0.25149		$    2,137.66
12	$ 8,500.00		0.22183		$    1,885.56
13	$ 8,500.00		0.19567		$    1,663.19
14	$ 8,500.00		0.17259		$    1,467.05
15	$ 8,500.00		0.15224		$    1,294.04
16	$ 8,500.00		0.13429		$    1,141.43
17	$ 8,500.00		0.11845		$    1,006.82
18	$ 8,500.00		0.10448		$        888.08
19	$ 8,500.00		0.09216		$        783.35
20	$ 8,500.00		0.08129		$        690.96
		Initial Investment			$ 50,386.73

Year	Amount		PV @ 10%		PV
0	$ (50,386.73)		1		$ (50,386.73)
1	$      7,000.00		0.90909		$      6,363.64
2	$      7,000.00		0.82645		$      5,785.12
3	$      7,000.00		0.75131		$      5,259.20
4	$      7,000.00		0.68301		$      4,781.09
5	$      7,000.00		0.62092		$      4,346.45
6	$      7,000.00		0.56447		$      3,951.32
7	$      7,000.00		0.51316		$      3,592.11
8	$      7,000.00		0.46651		$      3,265.55
9	$      7,000.00		0.42410		$      2,968.68
10	$      7,000.00		0.38554		$      2,698.80
11	$      8,500.00		0.35049		$      2,979.20
12	$      8,500.00		0.31863		$      2,708.36
13	$      8,500.00		0.28966		$      2,462.15
14	$      8,500.00		0.26333		$      2,238.32
15	$      8,500.00		0.23939		$      2,034.83
16	$      8,500.00		0.21763		$      1,849.85
17	$      8,500.00		0.19784		$      1,681.68
18	$      8,500.00		0.17986		$      1,528.80
19	$      8,500.00		0.16351		$      1,389.82
20	$      8,500.00		0.14864		$      1,263.47
		NPV			$   63,148.44

So, NPV = $ 63,148.44

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