Question
I have been trying to do this question but I don't understand the process. Every example question I see uses a different method and therfore
I have been trying to do this question but I don't understand the process. Every example question I see uses a different method and therfore gives me a different solution. Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: |
Year | Cash Flow | ||
0 | $ | 1,230,000 | |
1 | 405,000 | ||
2 | 470,000 | ||
3 | 365,000 | ||
4 | 320,000 | ||
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. |
If Anderson uses a required return of 10 percent on this project, what are the NPV and IRR of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR as a percent.) |
NPV | $ 19406 | |
IRR | 10.77 | % |
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