This preview shows page 1. Sign up to view the full content.
Unformatted text preview: a. 0 = 3 2 1 ) IRR 1 ( 000 , 510 $ ) IRR 1 ( 000 , 780 $ ) IRR 1 ( 000 , 510 $ + + + + + $4,000,000 IRR = 31.55%. Alternatively, with a financial calculator, input the following: CF = 4000000, CF 1 = 510000, CF 2 = 780000, CF 3 = 510000, and solve for IRR = 31.55%. b. NPV = 3 2 1 ) 15 . 1 ( 000 , 510 $ ) 15 . 1 ( 000 , 780 $ ) 15 . 1 ( 000 , 510 $ + + $4,000,000. With a financial calculator, input the following: CF = 4000000, CF 1 = 510000, CF 2 = 780000, CF 3 = 510000, and I = 15 to solve for NPV = $2,631,396.40. The results of this run are very bad because the project’s life is so short. Had the life turned out (by chance) to be 13 years, the longest possible life, the IRR would have been about 25%, and the NPV would have been about $1 million. Answers and Solutions: 12  11...
View
Full
Document
This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
 Spring '08
 Staff

Click to edit the document details