Question
Short Sighted Limited is considering to invest in a project which will return cash flows of $10,000 one year from now, $30,000 two years from
Short Sighted Limited is considering to invest in a project which will return cash flows of $10,000 one year from now, $30,000 two years from now and $50,000 three years from now. The initial investment required will be $80,000 today.
a) Determine the NPV of this project if the required rate of return is 12% p.a.
b) Evaluate the IRR of this project based on this $80,000 investment.
c) Advise Short Sighted Limited whether to accept this project based on NPV calculated in (a) and IRR (as compared to the required rate of return of 12%) calculated.
Step by Step Solution
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Step: 1
a To determine the NPV of this project we need to discount the cash flows back to the...
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Intermediate Financial Management
Authors: Eugene F. Brigham, Phillip R. Daves
12th edition
1285850033, 978-1305480698, 1305480694, 978-0357688236, 978-1285850030
