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a project has annual cash flows of $5,500 for the next 10 years and then $9,000 each year for the following 10 years. the irr of this 20-year project is 12.45%. if the firm's wacc is 12%, what is the project's npv? do not round intermediate calculations. round your answer to the nearest cent.

Sagot :

varshamittal029

The project's NPV $209.56 approximately. The worth of all future cash flows, both positive and negative, discounted to the present, during the course of an investment, is known as net present value (NPV).

For the given question, the project's NPV is computed as shown below:

NPV = Initial investment + Present value of future cash flows

Present value is computed as follows:

= Future value / (1 + r)^n

So, the NPV at 9% is computed as follows:

= $ 5,500 / 1.121 +  $ 5,500 / 1.122 +  $ 5,500 / 1.123 +  $ 5,500 / 1.124 +  $ 5,500 / 1.125 +  $ 5,500 / 1.126 +  $ 5,500 / 1.127 +  $ 5,500 / 1.128 +  $ 5,500 / 1.129 +  $ 5,500 / 1.1210 + $ 9,000 / 1.1211 + $ 9,000 / 1.1212 + $9,000 / 1.1213 + $ 9,000 / 1.1214 + $ 9,000 / 1.1215 + $ 9,000 / 1.1216 + $9,000 / 1.1217 + $9,000 / 1.1218 + $ 9,000 / 1.1219 + $ 9,000 / 1.1220

= $ 129,152.6577 approximately

The project's NPV at 12.45% is computed as follows:

= $ 5,500 / 1.12451 +  $ 5,500 / 1.12452 +  $ 5,500 / 1.12453 +  $ 5,500 / 1.12454 +  $ 5,500 / 1.12455 +  $ 5,500 / 1.12456 +  $ 5,500 / 1.12457 +  $ 5,500 / 1.12458 +  $ 5,500 / 1.12459 +  $ 5,500 / 1.124510 + $ 9,000 / 1.124511 + $ 9,000 / 1.124512 + $ 9,000 / 1.124513 + $ 9,000 / 1.124514 + $ 9,000 / 1.124515 + $ 9,000 / 1.24516 + $ 9,000 / 1.124517 + $ 9,000 / 1.124518 + $ 9,000 / 1.124519 + $ 9,000 / 1.124520

= $ 128,943.0934

Now, we shall take the difference of the two NPV's as computed above:

= $ 129,152.6577 - $ 128,943.0934

= $ 209.56 approximately

Learn more about Net Present Value here: https://brainly.com/question/18848923

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