Calculate the npv and irr, Business Economics

Assignment Help:

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?


Related Discussions:- Calculate the npv and irr

Explain about the term underemployment and unemployment rate, Explain about...

Explain about the term underemployment and unemployment rate. Discouraged employees are non-working people who are able of working although are not actively in search of a job.

Define the velocity of circulation of money, QUESTION (a) (i) Define th...

QUESTION (a) (i) Define the velocity of circulation of money. (ii) By comparing the Fischer's Quantity Theory of money and Keyne's Liquidity Preference Framework, explain cl

How can trade agreements assist development, How can trade agreements assis...

How can trade agreements assist development? A trade agreement is while two or more countries to by decrease or abolish tariffs, non-trade and quotas barriers which are establ

Elesticity, elasticity concept occupies a central place in policy formulati...

elasticity concept occupies a central place in policy formulation

Pricing strategy, You own a small retail business that produces a product t...

You own a small retail business that produces a product that is slightly different from that of your many competitors. Your firm is currently making an economic profit. The absolut

Baumol''s, the basic assumption of the static model

the basic assumption of the static model

Evaluate Perfect Competition, Evaluation of perfect competition arguing the...

Evaluation of perfect competition arguing the effect on stakeholders, priorities and SR/LR

Economic theory, How does economic theory contributes to managerial decisio...

How does economic theory contributes to managerial decisions?

How is business cycle essential in downturns and upturns, How is business c...

How is business cycle essential in economic downturns and upturns? The Business Cycle: It is the short-run alternation between economic upturns and downturns. A

Write Your Message!

Captcha
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