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Calculate the NPV for a 3-year project with the following cashflows and a required...

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Accounting

Calculate the NPV for a 3-year project with the following cashflows and a required return of 15%:
CF0 = -$800,000 ATCF1 = $160,000 ATCF2 = $160,000 ATCF3 = $160,000ATER = $600,000

Calculate the IRR for a 2-year project with the following cashflows and a required return of 12%:
CFO = -$375,000 ATCF1 = $27,500 ATCF2 = -$134,800 ATER =$596,000

ATER = After-Tax Equity Reversion

ATCF = After-Tac Cash Flow

Please show me how you answer the problem.

Answer & Explanation Solved by verified expert
4.1 Ratings (466 Votes)

1 Calculation of NPV:
A B A*B
Year Cash Flows Discount Factor @ 15% Present Value
0 -800000 1.00 -8,00,000
1 160000 0.87 1,39,130
2 160000 0.76 1,20,983
3 160000 0.66 1,05,203
3 600000 0.66 3,94,510
Net Present Value -40,174
2
A B A*B
Year Cash Flows Discount Factor @ 8% Present Value Discount Factor @ 10% Present Value
0 -375000 1.00 -3,75,000 1.00 -3,75,000
1 27500 0.93 25,463 0.91 25,000
2 -134800 0.86 -1,15,569 0.83 -1,11,405
3 596000 0.79 4,73,124 0.75 4,47,784
Net Present Value 8,018 Net Present Value -13,621
IRR= 8%+(8018/(8018+13621)*2%
8%+0.74%
8.74%
Required Rate of Return is 12% , But IRR is 8.74%, SO the project is unacceptable

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In: AccountingCalculate the NPV for a 3-year project with the following cashflows and a required return...Calculate the NPV for a 3-year project with the following cashflows and a required return of 15%:CF0 = -$800,000 ATCF1 = $160,000 ATCF2 = $160,000 ATCF3 = $160,000ATER = $600,000Calculate the IRR for a 2-year project with the following cashflows and a required return of 12%:CFO = -$375,000 ATCF1 = $27,500 ATCF2 = -$134,800 ATER =$596,000ATER = After-Tax Equity ReversionATCF = After-Tac Cash FlowPlease show me how you answer the problem.

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