box (1)-sb664246@sju.e Project-FIN 200 DOS 201 Chapter #8 O lezto mheducation.co
ID: 2782857 • Letter: B
Question
box (1)-sb664246@sju.e Project-FIN 200 DOS 201 Chapter #8 O lezto mheducation.com/hm tpx Chapter wa × C Anderson International Limi |+ 10.00 points Problem 8-25 Calculating IRR ILO 3, 4] A project has the following cash flows S 66,000 -40,000 -33,200 What is the IRR for this project? (Do not round intermediate calculations and enter your Internal rate of return 743% What is the NPV of this projact it the required return is 4 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to Net present value 3156 80 What is the NPV of the projoct if the required return is 0 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 Net present value What is the NPV of the project if the required return is 22 percent? (A negative answer should be indicated by a minus sign. Do not round intermedilate calculations and round your answer to Net present value 10007 28 answer as a percent rounded to 2 decimal places, e.g, 32.16.) References Leaming Objective 08-04 Evaluslo proposed invesiments by using he net Worksheet Difficulty. 2 Intermediate Learning Objective. 08 03 Explain the normal rate of return criterion and its associated strengths and Section Shentino" Rate of Problem 8-25 Calculating IRR [LO 3, 41Explanation / Answer
NPV of the cash flows is given by
NPV = 66,000 – 40,000/(1 + r) – 33,200/(1 + r)^2
Assume, V = 1/(1 + r) where, V is positive, and for IRR, NPV = 0
33,200*V^2 + 40,000*V – 66,000 = 0
This is quadratic equation.
V = 0.930838, r = 0.074300 = 7.43%
NPV @ 4% = 66,000 – 40,000/1.04 – 33,200/1.04^2 = -3,156.80
NPV @ 0% = 66,000 – 40,000/1 – 33,200/1^2 = 7200
NPV @ 22% = 66,000 – 40,000/1.22 – 33,200/1.22^2 = -10,907.28
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.