A project has the following cash flows: Year Cash Flow 0 $70,500 1 48,500 2 29,6

Question

A project has the following cash flows:

Year Cash Flow

0 $70,500

1 48,500

2 29,600   

Requirement 1: What is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Requirement 2: What is the NPV of this project if the required return is 4 percent? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

Requirement 3: What is the NPV of the project if the required return is 0 percent? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

Requirement 4: What is the NPV of the project if the required return is 21 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g.,32.16).)

Explanation / Answer

1) IRR: Year Cash flow pvif @ 8% PV @ 8% pvif @ 7% PV @ 7% 0 -70500 1 48500 0.9259 44907 0.9346 45327 2 29600 0.8573 25377 0.8734 25854 70285 71181 IRR = 8 + 215/(71181-70285) =            8.24 % 2) NPV @ RR of 4%: Year Cash flow pvif @ 4% PV @ 4% 0 -70500 1.0000 -70500.00 1 48500 0.9615 46634.62 2 29600 0.9246 27366.86 NPV 3501.48 3) NPV @ RR of 0%: Year Cash flow pvif @ 0% PV @ 0% 0 -70500 1.0000 -70500.00 1 48500 1.0000 48500.00 2 29600 1.0000 29600.00 NPV 7600.00 3) NPV @ RR of 21%: Year Cash flow pvif @ 21% PV @ 21% 0 -70500 1.0000 -70500.00 1 48500 0.8264 40082.64 2 29600 0.6830 20217.20 NPV -10200.16

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