Question

Your factory has been offered a contract to produce a part for a new printer. The contract would last for three​ years, and your cash flows from the contract would be $5.00 million per year. Your upfront setup costs to be ready to produce the part would be $8.00 million. Your discount rate for this contract is 8.0 %.

a. What is the​ IRR? The IRR is_____ %. (Round to two decimal​ places.)

b. The NPV is $4.89 ​million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV​ rule?______.

can you please show all steps and inputs for both the financial calculator and the basic Casio calculator.

Answer 1

Using financial calculator
1.
NPV

press CF 2nd CE/C
press CF
-8000000
Enter
down arrow,
5000000
Enter
down arrow (twice),
5000000
Enter
down arrow (twice),
5000000
Enter
down arrow (twice),

press NPV
Type 8
Enter
press down arrow
press CPT

IRR

press CF 2nd CE/C

press CF
-8000000
Enter
down arrow,
5000000
Enter
down arrow (twice),
5000000
Enter
down arrow (twice),
5000000
Enter
down arrow (twice),

press IRR
press down arrow
press CPT

Using Casio calculator
2.
NPV
=-8000000+5000000/0.08*(1-1/1.08^3)

IRR you cannot calculate using Casio