Badri Designs has prepared the following estimates for a long-term project it is considering. The initial investment

Question:

Badri Designs has prepared the following estimates for a long-term project it is considering. The initial investment is US$18,250, and the project is expected to yield after-tax cash inflows of US$4,000 per year for 7 years. The firm has a 10 percent cost of capital.

a. Determine the net present value (NPV) for the project.

b. Determine the internal rate of return (IRR) for the project.

c. Would you recommend that the firm accept or reject the project? Explain your answer.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...