In: Finance
Suppose we are asked to decide whether a new project should be launched. We expect that cash flows over the five-year life of the project will be $350 million in the first two years, $375 million in the next two years, and $385 million in the last year. The initial investment is expected to cost $995 million. The firm’s required return is 10%. Using a financial calculator, compute the NPV and IRR of this project.
Net present value is solved using a financial calculator. The steps to solve on the financial calculator:
Net present value at 10% required rate of return is $389,365,822.
Internal rate of return is calculated using a financial calculator by inputting the below in a financial calculator:
The IRR is 24.07%.
In case of any query, kindly comment on the solution.