Question

In: Finance

A project generates cash flows of $125k, $125k, and $95k. The required rate of return is...

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

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago
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