What is the NPV and IRR of the project

Assignment Help Financial Management
Reference no: EM131027049

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 –$592,000 1 222,000 2 165,000 3 230,000 4 209,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. Assume Anderson uses a required return of 13 percent on this project. Requirement 1: What is the NPV of the project? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) Net present value $ Requirement 2: What is the IRR of the project? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return %

Reference no: EM131027049

Questions Cloud

Expected net present value of this purchase opportunity : Stu can purchase a one-bedroom house near his college today for $110,000, including the cost of some minor repairs. He expects to be able to resell it in four years for $150,000 if he just puts a little effort into cleaning up the property. At a disc..
Identical deposit each year up to and including the year : Today is your birthday and you decide to start saving for college. You will begin college on your 18th birthday and will need $10,000 per year at the end of each of the next 4 years (after that 18th birthday - isn't it nice the college lets you pay a..
What is the profit equation for the company : Soumotchka Accessories make customized handbags to order. The price they can charge depends on how many they sell, x, consistent with the expression: What is the profit equation for the company?
Calculate the bonds default risk premium : Dakota Corporation 15-year bonds have an equilibrium rate of return of 10 percent. For all securities, the inflation risk premium is 1.75 percent and the real risk-free rate is 3.50 percent. The security’s liquidity risk premium is 1.20 percent and m..
What is the NPV and IRR of the project : Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 –$592,000 1 222,000 2 165,000 3 230,000 4 209,000 All cash flows will occur in Erewhon and are expressed in dollars...
Calculate the initial outlay and depreciable asset : A company is purchasing a new machine which will cost $130,000 with additional shipping costs of $5,000 and set up and installation costs of $12,000. An additional $8,000 in Net Working Capital will be required. Calculate the Initial Outlay (startup ..
The increment to the market value of the equity equals : Red Shoe Co. has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. Assume that the increment to the market value of the equity equals the gross pr..
Equity before the announcement of the debt issue : Green Manufacturing, Inc., plans to announce that it will issue $1.92 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 6 percent.  What is the expected return on Green’s equit..
Both produce widgets : Two firms, X and Y, both produce widgets. The price of widgets is $1 each. Firm X has total fixed costs of $500,000 and variable costs of .50 per widget. Firm Y has total fixed costs of $220,000 and variable costs of .75 per widget. The corporate tax..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the expected annual cash flow

Cooper Commons is considering purchasing new, technologically advanced solar panels. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its useful life of 10 years. The excess electricity from the panels will be sold back ..

  Considering two mutually exclusive projects

Zellers, Inc. is considering two mutually exclusive projects, A and B. Project A costs $75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 in year one, $37,000 i..

  Provide a realistic assessment of expected revenues

Explain how purchase of the apple press might affect the company's revenue goals. Based on this information, explain whether Anthony's Orchard should invest in the apple press

  About rat race home security

Use the following information about Rat Race Home Security, Inc. to answer the questions: Average selling price per unit $318. Variable cost per unit $191 Units sold 480 Fixed costs $9,389 Interest expense $15,645 Based on the data above, what is the..

  Determine the life cycle of the existing heating system

A residential building is heated with a 78 percent efficient gas-fired furnace (costing $1,600). The annual heating load is estimated at 160 MMBtu. The cost of gas is $6.00/ MMBtu. For the discount rate of 5 percent and a 10-year cycle, determine: Th..

  Expected to increase at a constant growth rate

Jane’s sister-in-law, a stockbroker at Invest, Inc., is trying to get Jane to buy the stock of HealthWest, a regional HMO. The stock has a current market price of $25, its last dividend (D0) was $2.00, and the company’s earnings and dividends are exp..

  Expected to pay the dividends

Lohn Corporation is expected to pay the following dividends over the next four years: $20, $16, $15, and $8.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 1..

  Present value of an annuity due

Present Value of an Annuity Due If the present value of an ordinary, 7-year annuity is $6,500 and interest rates are 7.5 percent, what’s the present value of the same annuity due?

  As bondholders required rates of return change

As bondholders' required rates of return change, the ________ of outstanding bonds will also change.

  What is the current market value of this preferred stock

If you know that investors require a 15 percent pretax rate of return on this preferred stock, what is the current market value of this preferred stock?

  Most recent financial statements

In its most recent financial statements, Newhouse Inc. reported $65 million of net income and $975 million of retained earnings. The previous retained earnings were $926 million. How much in dividends were paid to shareholders during the year? Assume..

  How a firm determine its optimal capital structure

How a firm determine its optimal capital structure. Explain how they do it. Why might optimal capital structure differ across industries? Explain.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd