Different Forms of Calculations: NPV and IRR
Problem B was similar in concept to that of Problem A. However, a more realistic discount rate was involved. In this instance, the investor had a required rate of return of 5%. Through the calculations, the NPV was ultimately positive. As such, the investor should provide the initial cash outlay.
Finally problem see was a simply IRR calculation using the excel spreadsheet. Through the calculations, the investor or corporation has a 7% hurdle rate before a project can be undertaken (Baker, 2000).
Problem 1 Discount Rate
0%
Problem A
Year
Cash Flow
Present Value $98,000.00
0
$549,000.00
$549,000.00
1
$91,000.00
$91,000.00
2
$182,000.00
$182,000.00
3
$374,000.00…

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