Problem 12-1: Net Present Value (NPV) and Internal Rate of Return

A firm is considering a major expansion that will cost SAR 22,000,000.

Annual cash flows from the project are expected to be SAR 4,000,000 for 10 years.

The firm uses a discount rate of 12%.

Calculate the Net Present Value (NPV) and the Internal Rate of Return of the project and determine if the project is acceptable based on NPV and IRR decision criteria.

Data

Discount Rate 12%

Initial outlay -22000000

Cash Flow 1 4000000

Cash Flow 2 4000000

Cash Flow 3 4000000

Cash Flow 4 4000000

Cash Flow 5 4000000

Cash Flow 6 4000000

Cash Flow 7 4000000

Cash Flow 8 4000000

Cash Flow 9 4000000

Cash Flow 10 4000000