Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the

Question

Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:

  

Year Cash Flow
0 –$ 40,000,000
1 64,000,000
2 – 13,000,000

  

a-1

What is the NPV for the project if the company requires a return of 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

  NPV $   

  

a-2 Should the firm accept this project?

No
Yes

  

b.

This project has two IRR's, namely  percent and  percent, in order from smallest to largest. (Note: If you can only compute one IRR value, you should input that amount into both answer boxes in order to obtain some credit.) (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Project should be accepted as it is having positive cash flows  

Particulars Year Cash Flow PVF @ 10% PV @ 10% Cash Flow 0 -40000000                                 1.00 -40000000 Cash Flow 1 64000000                                 0.91 58181818.2 Cash Flow 2 -13000000                                 0.83 -10743802 Net Present Value 7438016.53

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