Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $ 587,000 1 217,000

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:

Year Cash Flow
0 $ 587,000
1 217,000
2 160,000
3 225,000
4 204,000

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 4 percent. Assume Anderson uses a required return of 12 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 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook On Second Lien Loans & Intercreditor Agreements

Authors: Mark N. Berman, Jo Ann J. Brighton

1st Edition

0981865593, 978-0981865591

More Books

Students also viewed these Finance questions