Question
An investment of $500 today is expected to bring the future cash flows for years 1 to 4 shown below. After the 4th year cash
An investment of $500 today is expected to bring the future cash flows for years 1 to 4 shown below. After the 4th year cash flows are expected to grow at the given long term growth rate forever.
Find the NPV and IRR of the investment.
Inputs | |||||
Discount rate | 25.0% | ||||
Long Term growth rate | 5.0% | ||||
Period | |||||
Cash Flows | (500.00) | 200.00 | 210.00 | 240.00 | 260.00 |
Net Present Value | |||||
*Formula: = NPV(B5, C9:F9)x(1+0.05)+B9 | 49.96 | ||||
Internal Rate of Return | |||||
*Formula =IRR(B9:F9) | 27.52 | ||||
What would be the method to calculate the 5 - infinity cash flows using the long term growth rate? My formulas for NPV and IRR are incorrect. I am simply showing what work I have performed so far. If IRR is NA, just answer NA.
The correct answers are NPV = 582.88 and IRR = NA
What are the formulas that will give me this output?
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