Need help with the following: Problem 5-25 NPV and IRR Butler International Limi

Question

Need help with the following:

Problem 5-25 NPV and IRR Butler International Limited is evaluating a project in Erewhon. The project will create the following cash ilRAR YearCash Flow 0 $1,280,000 455,000 520,000 415,000 370,000 4 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 4 percent If the company uses a required return of 12 percent on this project, what are the NPV and IRR of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent.) NPV IRR

Explanation / Answer

NPV = -$25201.64

IRR = 11.32%

0 1 2 3 4 5 Cashflow -1280000 455000 520000 415000 370000 0 Values after reinvestment -1280000 0 473200 540800 431600 384800 Present Value -1280000 0 377232.1 384930.8 274289.6 218345.9 NPV -25201.64 IRR 11.32%

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