Question

. 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?

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.