Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Butler International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $ 1,240,000 1 415,000

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

Year Cash Flow
0 $ 1,240,000
1 415,000
2 480,000
3 375,000
4 330,000

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 5 percent.

a. If the company uses a required return of 11 percent on this project, what are the NPV and IRR of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent.)

NPV $
IRR %

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

Finance Bundling And Finance Transformation

Authors: Frank Keuper, Kai-Eberhard Lueg

1st Edition

3658042109, 978-3658042103

More Books

Students also viewed these Finance questions