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 –$ 39,500,000 1 63,500,000 2 – 12,500,000 a-1 What is the NPV for the project if the company requires a return of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 7561926.79 a-2 Should the firm accept this project? No Yes b. This project has two IRR's, namely percent and 37.79 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

yes firm should accept the project as it has positive npv.

2. irr are use as hit and trail method so you need to use diiferent percentage and try to find out where pvci = pvco

year pvfactor = 1/(1+r)^t 0 -39500000 1 -39500000 1 63500000 0.900900901 1/(1.11)^1 57207207.21 2 -12500000 0.811622433 1/(1.11)^2 -10145280.42 NPV 7561926.792

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