NPV and IRR: Equal Annual Net Cash Inflows Kailey James Company is evaluating a
ID: 2579889 • Letter: N
Question
NPV and IRR: Equal Annual Net Cash Inflows
Kailey James Company is evaluating a capital expenditure proposal that requires an initial investment of $14,900, has predicted cash inflows of $4,000 per year for 12 years, and has no salvage value.
(a) Using a discount rate of 14 percent, determine the net present value of the investment proposal. (Round to the nearest whole number.)
$Answer
(b) Determine the proposal's internal rate of return.
Answer
%
(c) What discount rate would produce a net present value of zero?
Answer
%
Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Amount a) Initial Investment 14,900.00 Cash inflow per year 4,000.00 PVF for 12 Years at 14% 5.6603 Present Value of cash inflows 22,641.17 Net present Value =22641.17 - 14900 7,741.17 Time PVF at 14% 1.00 0.8772 2.00 0.7695 3.00 0.6750 4.00 0.5921 5.00 0.5194 6.00 0.4556 7.00 0.3996 8.00 0.3506 9.00 0.3075 10.00 0.2697 11.00 0.2366 12.00 0.2076 5.6603 b) PVF for 12 Years = 14900/4000 3.7250 Looking at below table IRR is 25% Time PVF at 25% 1.00 0.8000 2.00 0.6400 3.00 0.5120 4.00 0.4096 5.00 0.3277 6.00 0.2621 7.00 0.2097 8.00 0.1678 9.00 0.1342 10.00 0.1074 11.00 0.0859 12.00 0.0687 3.7251 c) NPV is zero at IRR. Thus discount rate of 25% would produce zero NPV
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