East Coast Television is considering a project with an initial outlay of $X (you

Question

East Coast Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $45,000 a year at the end of each year for the next 14 years. The appropriate discount rate for this project is 9 percent. If the project has an internal rate of return of 12 percent, what is the project's net present value? If the project has an internal rate of return of 12% then the project's initial outlay is $___ If the discount rate is 9%, then the project's NPV is $___

Explanation / Answer

Calculation of the Net Present Value Year 0 298268 1 -298268 1 45000 0.917431 41284.4 2 45000 0.84168 37875.6 3 45000 0.772183 34748.26 4 45000 0.708425 31879.13 5 45000 0.649931 29246.91 6 45000 0.596267 26832.03 7 45000 0.547034 24616.54 8 45000 0.501866 22583.98 9 45000 0.460428 20719.25 10 45000 0.422411 19008.49 11 45000 0.387533 17438.98 12 45000 0.355535 15999.06 13 45000 0.326179 14678.04 14 45000 0.299246 13466.09 NPV 52108.77 At IRR Cas Inflows- Cash Outflows= 0 298268- Cash Outflows = 0 Cash Outflows = 298268 1 45000 0.892857 40178.57 2 45000 0.797194 35873.72 3 45000 0.71178 32030.11 4 45000 0.635518 28598.31 5 45000 0.567427 25534.21 6 45000 0.506631 22798.4 7 45000 0.452349 20355.71 8 45000 0.403883 18174.75 9 45000 0.36061 16227.45 10 45000 0.321973 14488.8 11 45000 0.287476 12936.42 12 45000 0.256675 11550.38 13 45000 0.229174 10312.84 14 45000 0.20462 9207.892 Cash Inflows 298267.6 Net Present Valkue is $ 52109

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