Question

In: Finance

Calculate the IRR for the following project: a. An initial outflow of $15,220 followed by inflows...

Calculate the IRR for the following project:

a. An initial outflow of $15,220 followed by inflows of $5,000, $6,000, and $6,500

b. An initial outflow of $47,104 followed by inflows of $16,000, $17,000, and $18,000.

Solutions

Expert Solution

Ans a) 7.00%

Year Project Cash Flows (i) DF@ 5% (ii) PV of Project A ( (i) * (ii) ) DF@ 10% (ii) PV of Project A ( (i) * (ii) )
0 -15220 1                    (15,220.00) 1        (15,220.00)
1 5000 0.952                       4,761.90 0.909            4,545.45
2 6000 0.907                       5,442.18 0.826            4,958.68
3 6500 0.864                       5,614.94 0.751            4,883.55
NPV                           599.03 NPV              (832.32)
IRR = Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
5% + 599.03 / (599.03 + 832.32)*5%
7.00%

b) 4.01%

Year Project Cash Flows (i) DF@ 2% (ii) PV of Project A ( (i) * (ii) ) DF@ 10% (ii) PV of Project A ( (i) * (ii) )
0 -47104 1                    (47,104.00) 1        (47,104.00)
1 16000 0.980                     15,686.27 0.909          14,545.45
2 17000 0.961                     16,339.87 0.826          14,049.59
3 18000 0.942                     16,961.80 0.751          13,523.67
NPV                       1,883.95 NPV          (4,985.29)
IRR = Ra + NPVa / (NPVa - NPVb) * (Rb - Ra)
2% + 1883.95 / (1883.95 + 4985.25)*8%
4.01%

Related Solutions

A project requires an initial cash outflow of $5,400, and it will bring in cash inflows...
A project requires an initial cash outflow of $5,400, and it will bring in cash inflows of $2,600, $2,500, $2,900, $1,400, for the next four years, respectively. What is the net present value of these cash flows, given a discount rate of 10%? (Round answers to two decimals, enter answer without $ or "," , such as 1234.78)
A project has an initial cash outflow of $8,940 and produces cash inflows of $3,007, $3,392,...
A project has an initial cash outflow of $8,940 and produces cash inflows of $3,007, $3,392, and $3,993 for Years 1 through 3, respectively. What is the NPV at a discount rate of 13.9 percent? Do not round intermediate calculations and round your answer to the nearest cent.
Problem #4 Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project Initial...
Problem #4 Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project Initial Investment: -100,000 Annual project cash flow 22,000 for 6 years Cost of capital is 6%
IRR A project has an initial cost of $55,000, expected net cash inflows of $11,000 per...
IRR A project has an initial cost of $55,000, expected net cash inflows of $11,000 per year for 10 years, and a cost of capital of 14%. What is the project's IRR? Round your answer to two decimal places.
An investment requires an initial cash outflow of $5,100, and it will bring in cash inflows...
An investment requires an initial cash outflow of $5,100, and it will bring in cash inflows of $2,700, $1,500, $2,600, $2,700, for the next four years, respectively. What is the internal rate of return (IRR) of this project? (Format answer to percent and rounded to two decimals, enter your answers without %, for example, for answer 0.1243, enter 12.43 only)
Compute the IRR on the following cash flow streams: a. An initial investment of $22,482 followed...
Compute the IRR on the following cash flow streams: a. An initial investment of $22,482 followed by a single cash flow of $32,290 in year 6. (Round answer to 2 decimal places, e.g. 5.25%.) IRR % ____ b. An initial investment of $1,229,844 followed by a single cash flow of $1,864,300 in year 4. (Round answer to 2 decimal places, e.g. 5.25%.) IRR % _____ c. An initial investment of $1,749,912 followed by cash flows of $1,585,900 and $1,108,200 in...
What is the IRR of a project with the following characteristics? Initial investment is $2,000,000 Initial...
What is the IRR of a project with the following characteristics? Initial investment is $2,000,000 Initial investment is depreciated to $0 book value via straight-line over its 12 year life Project is expected to generate incremental sales of 1,900,000 per year, and incremental expenses of 1,400,000 per year There are no NWC or salvage cash flows The firm faces a 28% tax rate
Calculate the NPV at 9% and the IRR for the following projects: An initial outlay of...
Calculate the NPV at 9% and the IRR for the following projects: An initial outlay of $69,724 and an inflow of 15,000 followed by four consecutive inflows of $17,000
Ingram electric is considering a project with an initial cash outflow of $800000. this project is...
Ingram electric is considering a project with an initial cash outflow of $800000. this project is expected to have cash inflows of $350000 per year in year 1,2,3. the company has a wacc of 8.65% which is used as its reinvestment rate. whats the projects modified internal rate of return?
Suppose a project requires an initial cash outflow of $34,900. The project will last for four...
Suppose a project requires an initial cash outflow of $34,900. The project will last for four years with the annual cash flows given below. The required rate of return is 12%. (1) Compute the net present value of the project. Should the firm invest in this project based on net present value? Why? Year Cash Flows 1 $12,500 2 $19,700 3 0 4 $10,400 (2) Compute the internal rate of return. Should the firm invest in this project based on...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT