10 1.60 points value: Anderson International Limited is evaluating a project in

Question

10 1.60 points value: Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 594,000 224,000 167,000 232,000 211,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Net present value What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return

Explanation / Answer

Present Value = Future value/ ((1+r)^t) where r is 13% and t is the time period Year 0 1 2 3 4 Cash Flow -594000 22400 167000 232000 211000 Present value -594000 19823.01 130785.50 160787.64 129410.25 Net present values = sum of present values -$153193.61 IRR using excel 2.12%

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