Question

A project has the following cash flows:

  

Year	Cash Flow
0	$64,700
1	–30,700
2	–48,600

   

Required:
(a)	What is the IRR for this project?
	(Click to select)14.26%13.85%13.58%13.04%13.31%

   

(b)	What is the NPV of this project, if the required return is 8.5 percent?
	(Click to select)$-4,878.46$-5,122.38$4,878.46$-4,683.32$-4,976.03

   

(c)	NPV at 0 percent?
	(Click to select)$14,600.00$-14,600.00$-14,016.00$-14,892.00$-15,330.00

   

(d)	NPV at 17 percent?
	(Click to select)$3,016.88$3,105.61$2,957.73$2,839.42$-2,957.73

Answer 1

IRR is rate at which NPV is o

At 13.538%, NPV comes to 0, Hence IRR is 13.58%

Year	Cash flow	PVIF @ 13.583%	Present value
0	64700	1	64700.00
1	-30700	0.880	-27028.69
2	-48600	0.775	-37671.21
NPV			0

B) NPV when interest rate is 8.5%

Year	Cash flow	[email protected]%	Present value
0	64700	1	64700.00
1	-30700	0.922	-28294.93
2	-48600	0.849	-41283.53
NPV			-4878.46

C) NPV when Interest rate is 0%

Year	Cash flow	PVIF @ 0%	Present value
0	64700	1	64700.00
1	-30700	1.000	-30700.00
2	-48600	1.000	-48600.00
NPV			-14600.00

D) NPV when interest rate is 17%

Year	Cash flow	PVIF @ 17%	Present value
0	64700	1	64700.00
1	-30700	0.855	-26239.32
2	-48600	0.731	-35502.96
NPV			2957.73