A project has the following cash flows: Year Cash Flow 0 $ 40,500 1 – 19,500 2 –

Question

A project has the following cash flows: Year Cash Flow 0 $ 40,500 1 – 19,500 2 – 30,500 What is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16)) IRR % What is the NPV of this project, if the required return is 10 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate answers and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $ What is the NPV of the project if the required return is 0 percent? (Negative amount should be indicated by a minus sign.) NPV $ What is the NPV of the project if the required return is 20 percent? (Do not round intermediate answers and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $

Explanation / Answer

Calculation of NPV at 10%:

NPV = Outflow- PV of Inflow

NPV = 40,500 + (-42,934) = -$2,434

Calculation of NPV at 0%

PV of Inflow = 19,500 + 30,500 = -50,000

NPV = 40,500 + (-50,000) = -$9,500

Calculation of NPV at 20%:

NPV = 40,500 + (-37,430) = $-3,070

Year 1 Year 2 Total Inflow -19,500 -30,500 DF(10%) 0.90909 0.82645 Present Value -17,727 -25,207 -42,934

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