(Related to Checkpoint 11.1 and Checkpoint 11.4) (NPV and IRR calculation) East

Question

(Related to Checkpoint 11.1 and Checkpoint 11.4) (NPV and IRR calculation) East Coast Television is considering a project with an initial outlay of $X (you will have to determine this amount). It is expected that the project will produce a positive cash flow of $41,000 a year at the end of each year for the next 14 years. The appropriate discount rate for this project is 9 percent. If the project has an internal rate of return of 11 percent, what is the project's net present value? a. If the project has an internal rate of return of 11%, then the project's initial outlay is $ (Round to the nearest cent.) b. If the discount rate is 9%, then the project's NPV is $1 . (Round to the nearest dollar)

Explanation / Answer

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Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Initial Investment = Cash Flow 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 Intitial Investment = PV of all cash flows discounted at IRR rate= $286,256.47 (Using PV function in Excel IRR = 11% Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Initial Investment = $286,256.47 Cash Flow 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 41000 NPV using excel function $32,976 Discount rate = 9%

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