Question

1. For the following cash flows, find the NPV and IRR for a project. Use a 12.5% discount rate for the NPV.

Year   Investment     Projected Cash Inflow    Projected Cash Outflow

                 ($000)              ($000)                               ($000)

2015   $    18,546

2016                                  $44,550                             $52,250

2017                                  $54,256                            $54,892       

2018                                  $62,025                             $58,000

2019                                  $68,000                             $61,258

2020                                  $74,555                             $66,598

2021                                  $78,562                             $71,964

2022                                  $82,365                             $77,125

2023                                  $86,879                             $83,124

2024                                  $90,125                             $88,654

2025                                  $96,526                             $92,000

NPV =

IRR =

How do you solve this with a calculator?

Answer 1

Year	Investment	Projected cash inflow	Projected cash outflow	Net cash flow	PV @ 12.5%	PV of cash flows
2015	18546			-18546	1	-18546
2016		44550	52250	-7700	0.888	-6837.60
2017		54256	54892	-636	0.79	-502.44
2018		62025	58000	4025	0.702	2825.55
2019		68000	61258	6742	0.624	4207.01
2020		74555	66598	7957	0.555	4416.14
2021		78562	71964	6598	0.493	3252.81
2022		82365	77125	5240	0.439	2300.36
2023		86879	83124	3755	0.389	1460.70
2024		90125	88654	1471	0.346	508.97
2025		96526	92000	4526	0.308	1394.01
	NPV	-5520.50

IRR be calculated using Interpolation method or by using Trial or error method

By using that technique, IRR = 7.56%