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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Problem 5-25 NPV and IRR
|
Butler International Limited is evaluating a project in Erewhon. The project will create the following cash flows: |
| Year | Cash Flow | ||
| 0 | –$ | 950,000 | |
| 1 | 285,000 | ||
| 2 | 345,000 | ||
| 3 | 415,000 | ||
| 4 | 255,000 | ||
|
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 4 percent. |
If Butler uses a required return of 11 percent on this project, what are the NPV and IRR of the project?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))
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