Question

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I've done the work and got it wrong
My wrong answers:
NPV: 535.16
ROR: 9.81%
Please help
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This question is based on the following cash flows

C0=$10,000	I1=$2,000	I2=$2,000	I3=$3,000	I4=$3,000	I5=$2,500		L=$1,000
0	1	2	3	4	5

C: Cost, I: Income, L: Salvage

The escalation rate is 10% per year in this example.

Part 1

Calculate the escalated dollar ROR for this investment.

Part 2

Calculate the NPV of this investment assuming an escalated dollar minimum rate of return of 8%

Answer 1

Given present value of cash outflows =$10,000

calculation of present value of cash inflows : (in $)

Year	cash inflows	p.v.f @10%	p.v cash inflows@10%	p.v.f@8%	p.v cash inflows @8%
1	2000	0.909	1818	0.926	1852
2	2000	0.826	1652	0.857	1714
3	3000	0.751	2253	0.794	2382
4	3000	0.683	2049	0.735	2205
5	3500(2500+1000)	0.621	2173.5	0.681	2383.5
	Total :		9945.5		10536.5

calculation of IRR :

NPV at 8%=$10,536.5-$10,000

=$536.5

IRR=Smalldisc rate+NPV@8%/INF@8%-INF@10%*(dif b/w rat)

IRR=8%+$536.5/$10536.5-$9945.5*(10%-8%)

=8%+$536.5/$591*2%

=8%+1.81%

=9.81%

Escalated dollar ROR for this investment=9.81%

calculation of NPV@8%:

p.V of cash outflows =$10,000

P.v of cash inflows @8%=$10,536.5

NPV=P.V OF CASH INFLOWS -P. V OF CASH OUTFLOWS

NPV=$10,536.5-$10,000

=$536.5

NPV AT 8%=$536.5