If the cost of capital for the project shown below is 3 percentage points less t

Question

If the cost of capital for the project shown below is 3 percentage points less than the project’s IRR
(for example, if the project’s IRR is 12%, the cost of capital is 9%), what is the NPV of the project?

Year Cash Flow

 0                                    ($210,000)
 1                                     $40,000
 2                                     $50,000
 3                                     $60,000
 4                                     $60,000
 5                                     $70,000
 6                                     $70,000

Please show work

Explanation / Answer

IRR of projct is = IRR(-210000,40000,50000,60000,60000,70000,70000) = 15.23% So cost of Capital is 15.23% - 3% = 12.23% SO NPV = NPV(12.23%,40000,50000,60000,60000,70000,70000) -210000 = $19,946.71

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.