Howell Petroleum, Inc., is trying to evaluate a generation project with the foll

Question

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

If the company requires a 10 percent return on its investments, what is the NPV of the project? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

NPV = $

Compute the IRR for this project. (Do not include the percent signs (%). Enter rounded answers as directed, but do not use the rounded numbers in intermediate calculations. Enter the positive value in the first answers box, and the negative value in the next answer box. Round your answers to 2 decimal places (e.g., 32.16).)

Year Cash Flow 0 -37,500,000 1 56,500,000 2 -12,500,000

Explanation / Answer

AT IRR,

PV of outflows = PV of inflows

3,75,00,000 + 12500000/(1+r)^2 = 5650000/(1+r)

r = 23.73%

Year Cash Flow Cash flow @ 10% 0 -37,500,000 -37,500,000 1 56,500,000 51363636.36 2 -12,500,000 -10330578.51 NPV 3,533,058

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