BACKGROUND

The company ABC, L.C. manufactures some products with an average sales price of 25/unit, with fixed annual costs of 110,000. The average unit variable costs are 5.

DEVELOP

An investment requires an initial disbursement of 2,500,000 and the duration of the project is 3 years, in the first of which it generates a cash flow of 1,500,000, in the second 3,700,000 and the third 4,100,000.

1. Calculate the Net Present Value of the investment, knowing that inflation is 3% cumulative annually and that the required profitability in the absence of inflation is 8%.
2. Calculate the actual internal rate of return of the previous investment.

Provide reference and formula for the computation