Calculate the IRR, NPV, and PI for projects with the following cash flows. Do each NPV and
Question:
a. An initial outlay of $5,000 and inflows of $1,050 for seven years.
b. An initial outlay of $43,500 and inflows of $14,100 for four years.
c. An investment of $78,000 followed by 12 years of income of $11,500.
d. An outlay of $36,423 followed by receipts of $8,900 for six years.
Step by Step Answer:
IRR 0 C 0 C PVFA IRRn PVFA IRRn C 0 C a PVFA IRR7 50001050 47619 IRR 11 b PVFA IRR4 4350014100 3085...View the full answer
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
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