Year Cash Flows 0 ($150,000) 1 $ 30,000 2 $ 70,000 3 $ 90,000 Calculate the IRR

Question

Year        Cash Flows

0              ($150,000)

1                $ 30,000

2                $ 70,000

3                $ 90,000

Calculate the IRR of this project.

                             After-Tax          After-Tax

                             Accounting        Cash Flow

                Year          Profits       from Operations

                1                $799                 $ 750

                2                $150                 $1,000

                3                $200                 $1,200

                Initial investment = $1,500. Terminal cash flow = 0

Compute its profitability index if the discount rate is 6%.

Nova Devices, Inc. is evaluating a project with the following cash flows.  

Year        Cash Flows

0              ($150,000)

1                $ 30,000

2                $ 70,000

3                $ 90,000

Calculate the IRR of this project.

       33%
       11%
       28%
       18%

Explanation / Answer

Solution.

Calculation of the IRR of this project.

Used Spred sheet for IRR.

Answer is 11%

B. Calculation of profitability index.

Formula = 1 + ( NPV / Initial Investment )

Year Cash Flow 0                          (150,000.00) 1                              30,000.00 2                              70,000.00 3                              90,000.00 Irr 10.88%

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