# Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a portion of its planning and financial data when both itsmain and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of ProjectOmicron is 11.3%, but he can't recall how much Green Caterpillar originally invested in the project nor the project'snet present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generatedby Project Omicron. They are:Cash FlowYear\$2,000,000Year 1Year 2\$3,750,000\$3,750,000Year 3Year 4\$3,750,000The CFO has asked you to compute Project Omicron's initial investment using the information currently available toyou. He has offered the following suggestions and observations:A project's IRR represents the return the project would generate when its NPV is zero or thediscounted value of its cash inflows equals the discounted value of its cash outflows-when thecash flows are discounted using the project's IRR.The level of risk exhibited by Project Omicron is the same as that exhibited by the company'saverage project, which means that Project Omicron's net cash flows can be discounted usingGreen Caterpillar's 9% WACC.Given the data and hints, Project Omicron's initial investment isand its NPV is(rounded to the nearest whole dollar)A project's IRR willif the project's cash inflows increase, and everything else is unaffected.

Question
Step 1

Calculation of initial investment and NPV:

Initial investment is \$9,987,714 and NPV is \$555,731

Internal rate of return (IRR) is the rate at which NPV is zero.

Excel workings:

Step 2

Excel reference:

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