Question
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when its server and its backup server crashed. The company's
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of its planning and financial data when its server and its backup server crashed. The company's CFO members that the IRR of project lambda is 11.3 percent, but he can't recall how much Blue Hamster originall invested in the project nor the project's net present value. However, he found a note that contained the annual net cash flows expected to be generated by Project Lambda. They are:
Year | Cash Flow |
Year 1 | 1.6 mill |
Year 2 | 3m |
Year 3 | 3m |
Year 4 | 3m |
The CFO has asked you to compute Project Lambda's intial investment using the information currently available to you. He has offered the following suggestions and observations:
A projects irr represent the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows-when the cash flows are discounted using the project's IRR.
The level of risk exhibited by Project Lambda is the same as that exhibited by the company's average project, which means the Project Lambda's net cash flows can be discounted using Blue Hamster's 8% desired rate of return.
Given the date and hints, Project Lambda's initial investment is ( pick one of these numbers as the answer to the question) 9,248,033, 8065347,7990172, 8263830 and its NPV is 649,912, 682408, 552425, 519930
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