You are evaluating a project that costs $63,000 today. The project has an inflow

Question

You are evaluating a project that costs $63,000 today. The project has an inflow of $136,000 in one year and an outflow of $53,000 in two years. What are the IRRs for the project? (Negative answers should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) IRR Smallest %? Largest %?

What discount rate results in the maximum NPV for this project? (Negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) IRR %?

Explanation / Answer

Using trial and error method, we found out that NPV is increasing as the discount rate is decreased and the max NPV is attained when discount rate is 0%.

Year Cash flows 0 -63000 1 136000 2 -53000 IRR 64.84% NPV max ( when discount rate is 0 %) Rs. 20,000.00

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