Extra supermarket is considering to open another supermarket at the Nepani area. The project will involve an investment of $78 000 000 and will produce a positive cash flow of $25 000 000 in the first year. The cash flows will increase by 10 per cent each year thereafter for another five years (i.e. the project runs for six years). At that stage the project will cease. The company expects a rate of return of 17 per cent on this type of project

 a. Calculate NPV and IRR

 b. Should the company proceed with this investment opportunity? Why?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV and Internal Rate of Return IRR for the project we need to discount the cash flows using the companys expected ... View the full answer