Calculate the npv and irr, Business Economics

You are evaluating a project in the country of Expropriationstan. You estimate end-of-year cash flows as follows. Assume your discount rate for evaluating projects of this sort in Expropriationstan is 15%.

554_Compute the NPV and IRR.png

a. Compute the NPV and IRR of these cash flows. State a reject/accept recommendation.

b. Expropriationstan is trying to improve its economy. You find out that you will be blocked from using any net cash inflows your project generates for one year, and must "reinvest" the cash flows with the government for one year. (The government insists.)

Assume the "reinvestment rate" the government pays while it holds your cash is 5%; after a year, you get the cash flow back along with any accrued interest that was paid by the government. (If you have trouble conceptualizing this, imagine for a moment that the reinvestment rate were instead zero; what would the cash flows look like then?).

Recomputed the NPV and IRR, and make a new reject/accept recommendation.

c. You fear that the Expropriations tani government might lower its country's interest rates, and hence its "reinvestment rate" that it pays. What "reinvestment rate" makes the project zero NPV?

Posted Date: 2/20/2013 12:28:21 AM | Location : United States







Related Discussions:- Calculate the npv and irr, Assignment Help, Ask Question on Calculate the npv and irr, Get Answer, Expert's Help, Calculate the npv and irr Discussions

Write discussion on Calculate the npv and irr
Your posts are moderated
Related Questions
QUESTION (a) One of the differences between a monopolistically competitive industry and a perfectly competitive one is that in the former, there is product differentiation. (i)

Is structural change a problem? Economies are dynamic and adapt to meet evolving consumer wants needs. This means resources are moved from use to use in response to, say, chan

Fiscal Policy The government's use of spending and taxation to affect the stage of macroeconomic moment. In theory, weak economic activity needs simulative fiscal policy, which

The values for the long-run ATC curves of three different firms are listed in the table below: Quantity ATC 1 ATC 2 ATC 3

impact of economic policies on decision of any organisation

how can I show the supply and demand of internet hubs?

Barriers or Hindrances with Presenting Christian Gospel 1.) What practical steps could be taken to build a relationship with a follower of this worldview who might be a co-wor

Your student union has decided to support a local charity by fund-raising on a Rag Day to be held in the town. Key events include a fancy dress relay race with teams sponsored by l

Question: Yamba Home Products is just beginning its fourth quarter, in which peak sales occur. The company has requested a $12,000, 90-day loan from its bank to help meet cash

A1. Given the following production function Level of fertilizer Level of maize 0 0 1 44.9 2 83.6 3 110.1 4 127.3 5 136.9 6 139.9 7 137.1 8 129.2 a) Calculate the APP, MPP and elas