In: Finance
A project generates cash flows of $125k, $125k, and $95k. The required rate of return is 10%. The value of the project or “asset” is $288,317.
Given your answer, which ones are true.
IRR = 10%
PI = 1.0
NPV = 0
Statement showing Cash flows | ||||
Particulars | Time | PVf 10% | Amount | PV |
Cash Outflows | - | 1.00 | (288,317.00) | (288,317.00) |
PV of Cash outflows = PVCO | (288,317.00) | |||
Cash inflows | 1.00 | 0.9091 | 125,000.00 | 113,636.36 |
Cash inflows | 2.00 | 0.8264 | 125,000.00 | 103,305.79 |
Cash inflows | 3.00 | 0.7513 | 95,000.00 | 71,374.91 |
PV of Cash Inflows =PVCI | 288,317.05 | |||
NPV= PVCI - PVCO | 0.05 | |||
PI = PVCI/PVCO | 1.00 | |||
All are true. As NPV is 0 at 10% which means IRR is also 10% and PI is 1 |