For the following project, calculate:
(a) NPV at the end of the project (discount rate 15%)
(b) IRR at the end of the project.
Year (n) 
0 
1 
2 
3 
4 
Capex 
$600,000 
 
 
 
 
Income 
 
$200,000 
$200,000 
$200,000 
$200,000 
Undiscounted cash flow 

P/F (15%) 

Discounted cash flow 

IRR 
 
 
 
 
*P/F is the discount factor, converting a future value into a present value
Answer :
Year (n)  0  1  2  3  4 
Capex  $600,000         
Income    $200,000  $200,000  $200,000  $200,000 
Undiscounted cash flow  $600,000  $200,000  $200,000  $200,000  $200,000 
P/F (15%)  1  0.8696  0.7561  0.6575  0.5718 
Discounted cash flow  $600,000  $173,913  $151,229  $131,503  $114,351 
Sl no.  Particular  Amount  Notes 
1  Total Discounted Cash out flow  600000  Capex 
2  Total Discounted Cash Flows  $570,996 
Sum of discounted cash flow of year 1,2,3,4 
(12)  Net Present Value  $29,004 
b.) IRR of the project is 8% (in persentage) (see below working for computation )
IRR of the project  initial Investment :  = 
Present value * (1+R) ^ N 
600000  = 
570996*(1+R)^4 years 

600000/570996  =  (1+R)^4 years  
10.51  =  (1+R)^4 years  
=  (1+R)  
1.8005  =  (1+R)  
1.80051  =  R  
.8005  =  R 
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