Question

. Calculate the IRR and NPV for the following cash flows. Assume a 15% discount rate...

. Calculate the IRR and NPV for the following cash flows. Assume a 15% discount rate

Year

Project 1

Cash flow

Project 2

Cash flow

0

-$20,000

-$20,000

1

1,000

12,000

2

3,000

15,000

3

4,000

3,000

4

12,000

4,000

5

15,000

1,000

9. If your tenant pays you rent of $24,000 a year for 10 years, what is the present value of the series of payments discounted at 10% annually?

10. You are going to invest $300,000 in a real estate investment project that generates the following cash flows.

Year

1

2

3

4

5

Cash flow

100,000

100,000

100,000

100,000

100,000

Assuming an 11% discount rate, what is the NPV of this project? What is the IRR?

Homework Answers

Answer #1

1st question:

I have answered this question in Excel as follows:

Note:

  1. For DF @ 15% we have used power function where df=power(1/1.15,years)
  2. NPV is sum of PV of cash flows.
  3. IRR has been calculated using IRR function.

9. Present Value of series of payments=24,000*PVAF(10%,10)

=24,000*6.1446

=$1,47,470.4

10. This question I have answered in Excel as follows:

Note:

  1. For DF @ 11% we have used power function where df=power(1/1.11,years)
  2. NPV is sum of PV of cash flows.
  3. IRR has been calculated using IRR function.
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