Question 1:/ Question 2:/ Calculate the NPV at 12% and the IRR for the following

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Question 1:/

Question 2:/

Calculate the NPV at 12% and the IRR for the following projects. Round NPV to two decimal places. Round IRR to the nearest whole percentage. Use a minus sign to indicate a negative NPV. a. An initial outflow of 10,000 followed by three inflows of $4,000. IRR b. An initial outflow of $10,000 followed by inflows of $3,000, $4,000, and $5,000. NPV IRR $ c. An initial outflow of $10,000 followed by inflows of $5,000, $4,000, and $3,000 NPV $ IRR d. Notice that in parts a, b, and c, a total of $12,000 is received over three years. Compare the NPVs and IRRs to see the impact of shifting $2,000 between years one and three. The input in the box below will not be graded, but may be reviewed and considered by your instructor blank

Explanation / Answer

Solution:

a) The IRR would be when the NPv is zero hence the NPV of the project is :

IRR is 9.7% because at 9.7% the NPV is zero computed below:

Solution b)

NPV is computed below:

IRR is 8.9% for project b computed as :

-$0.71

Solution c) NPV :

IRR is 10.65% computed below:

Solution question 2)

All the three Payback ,NPV and IRR:

NPV is computed as :

Payback period is -25000 +10000+12000+5000 = +2000 hence within 3 year the entire amount invested is paidback hence it is 2 years 8months

IRr is when NPv is zero hence IRR is 16.35% computed below:

Year Cash flow Formula discount 12.00% Present value 0 -$10,000.00 $1.00 $1.00 -$10,000.00 1 $4,000.00 1/1.12^1 $0.89 $3,571.43 2 $4,000.00 1/1.12^2 $0.80 $3,188.78 3 $4,000.00 1/1.12^3 $0.71 $2,847.12 Net present value -$392.67

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