An investment has an installed cost of $563,382. The cash flows over the four-ye

Question

An investment has an installed cost of $563,382. The cash flows over the four-year life of the investment are projected to be $192,584, $236,318, $184,674, and $152,313.

If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.)

If the discount rate is infinite, what is the NPV? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.)

At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

An investment has an installed cost of $563,382. The cash flows over the four-year life of the investment are projected to be $192,584, $236,318, $184,674, and $152,313.

Explanation / Answer

1)

NPV = -563382 + 192584 + 236318 + 184674 + 152313 = 202507

2)

NPV = -563382

3)

0 = -563382 + 192584/(1+IRR) + 236318/(1+IRR)^2 + 184674/(1+IRR)^3 + 152313/(1+IRR)^4

IRR = 14.20%

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