Q-1: [15] (Cost - Benefit Analysis) Consider a project with the following cash flow: Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Project Costs $900,000 $125,000 Operational Costs $50,000 $52,000 $54,000 $56,000 $58,000 Revenue $200,000 $250,000 $275,000 $280,000 $285,000 Cost Savings $175,000 $400,000 $400,000 $350,000 $350,000 Net Income (Loss) ($900,000) $200,000 $598,000 $621,000 $574,000 $577,000 $2,570,000 Suppose that the chosen discount rate is 12% a Compute the net present value of the project. b) Compute the internal rate of return for this project and compare it to the value obtained using Excel functions. Show your procedure. [05] [10] a) Solution: (See Notes below) a) [08] Compute the net present value of the project, without using Excel's NPV(function NPV = (Show formula used) Ans: 794197.8339 b) [03] Compute the internal rate of return for this project and compare it to the value obtained using Excel functions. Show your procudure. n IRR = 0.417350 [05] Procedure: We can use tr... and er... using the table to the right. Keep changing the discount rate, i, until NPV is almost = 0. Net i Income 42% 1 ($900,000) ($634,987.83) 2 $200,000 99557.91197 3 $598,000 $210,024.45 4 $621,000 $153,880.35 5 $574,000 $100,352.07 6 $577,000 $71,172.65 NPV = ($0.39) [02] Using Excel Function: IRR = [02] Comparison The two values are