Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: |
Year | Cash Flow |
0 | –$576,000 |
1 | 206,000 |
2 | 149,000 |
3 | 214,000 |
4 | 193,000 |
All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. Assume Anderson uses a required return of 11 percent on this project. |
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a. | What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
b. | What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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