You are attempting to reconstruct a project analysis of a co-worker who was fire

Question

You are attempting to reconstruct a project analysis of a co-worker who was fired. You have found the following information:
1. The IRR is 12%.
2. The project life is 4 years.
3. The initial cost is $20,000.
4. In years 1, 2 and 3 the cash inflows are $3,000, $6,000, and $9,000, respectively.
5. You know there will be a cash flow in year 4, but the amount is not in the file.
6. The appropriate discount rate is 12%.

What is the NPV of the project? A.  $1038.24 B.  $9649.10 C.  $10352.88 D.  $11034.96 E.  $0 You are attempting to reconstruct a project analysis of a co-worker who was fired. You have found the following information:
1. The IRR is 12%.
2. The project life is 4 years.
3. The initial cost is $20,000.
4. In years 1, 2 and 3 the cash inflows are $3,000, $6,000, and $9,000, respectively.
5. You know there will be a cash flow in year 4, but the amount is not in the file.
6. The appropriate discount rate is 12%.

What is the NPV of the project? A.  $1038.24 B.  $9649.10 C.  $10352.88 D.  $11034.96 E.  $0

Explanation / Answer

At the IRR, NPV will always be equal to 0.

As the IRR given in the question is 12% and the discount rate is also 12% so at 12% NPV will be $0. It does not matter whether we are having the value of cashflow of year 4 or not.

So correct answer is E) $0

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