20.00 points Anderson International Limited is evaluating a project in Erewhon.
ID: 2391912 • Letter: 2
Question
20.00 points Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $582,000 212,000 155,000 220,000 199,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g, 32.16.) Net present value What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.9 32.16.) Internal rate of return References eBook& Resources Worksheet Leaming Objective: 08- Section: 8.4 The Internal Rate of Return 03 Explain the intema rate of retum criterion and its associated strengths and 24 sc FI F2 F3 od Fa FSExplanation / Answer
Answer
1) net present value
2 ) IRR
year cash flows discount factor @ 13 % dicounted cash flows 0 -582000 1.0000 -582000 1 0 0.8850 0.00 2 226840 0.7831 177648.99 3 165850 0.6931 114942.37 4 235400 0.6133 114375023 5 212930 0.5428 115569.87 net present value -29463.54Related Questions
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