Question

Company X considers three new projects.

Discount rate is 20%.

You need to analyze these projects

1. Calculate the NPV and IRR of the first new project based on the below information An initial investment cost: $1,500,000 Salvage value: $200,000 Cash flows 1 $550,000 2 $425,000 3 $325,000 4 $385,000 5 $450,000 6 $500,000

2. Calculate the NPV and IRR of the second new project based on the information: An initial investment cost is $52,500. The project generates $8,250 in the first year and thereafter it will grow at a constant rate of 5% forever.

3. Use an embedded function in Excel to calculate the NPV of the project if an initial investment cost $1,000,000 and it generates the cash flows, $275,000 in the first year. The cash flows had zero growth and the project only generates cash flows for 10 years.

Answer #1

Formulae

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