You are evaluating a project that costs $60,000 today. The project has an inflow

Question

You are evaluating a project that costs $60,000 today. The project has an inflow of $130,000 in one year and an outflow of $50,000 in two years. What are the IRRs for the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

IRR Smallest =

IRR Largest =

What discount rate results in the maximum NPV for this project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

IRR =

Explanation / Answer

Excel Provides a very easy method to calculate multiple IRRs and NPV
From Below the IRR rates are
IRR Smallest =-50%
IRR Largest = 66.67%
NPV Calculation is done by taking various discount rates we find that from 23.06% to 23.09% NPV is highest at 24,500.
IRR = -23.06% to -23.09 so IRR = -23.075% +/- 0.015%

Cash Flows T=0 -60000 T=1 130000 T=2 -50000 IRR using excel function= IRR(CF0:CF2, Guess Values) Guess Value Discount Rates NPV using Excel function = NPV(Discount rates, -50.00% -40.00% -40% $17,777.78 -50.00% -35.00% -35% $21,656.80 -50.00% -30.00% -30% $23,673.47 -50.00% -25.00% -25% $24,444.44 66.67% -20.00% -24% $24,487.53 66.67% -15.00% -23.09% $24,500.00 66.67% -10.00% -23.08% $24,500.00 66.67% -5.00% -23.07% $24,500.00 66.67% 0.00% -23.06% $24,500.00 66.67% 5.00% -23.05% $24,499.99 66.67% 10.00% -23.04% $24,499.98 66.67% 15.00% -23.03% $24,499.97 66.67% 20.00% -23.02% $24,499.95 66.67% 25.00% -23.01% $24,499.94 66.67% 30.00% -23% $24,499.92 66.67% 35.00% -22% $24,483.89 66.67% 40.00% -21% $24,441.60 -20% $24,375.00 -15% $23,737.02 -10% $22,716.05 -5% $21,440.44 0% $20,000.00 5% $18,458.05 10% $16,859.50 15% $15,236.29 20% $13,611.11 25% $12,000.00 30% $10,414.20 35% $8,861.45 40% $7,346.94

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