Computation of irr as well as net present value

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Reference no: EM1313153

Computation of IRR as well as net present value

Consider a project with the expected cash flows:

Year Cash flow
0 -$ 615,000
1 + 141,000
2 + 300,000
3 +$ 300,000

• What is this project's internal rate of return?
• If the discount rate is 0%, what is this project's net present value?
• If the discount rate is 4%, what is this project's net present value?
• If the discount rate is 8%, what is this project's net present value?
• If the discount rate is 12%, what is this project's net present value?

Now draw a chart where the discount rate is on the horizontal axis (the "x" axis) and the net present value on the vertical axis (the Y axis). Plot the net present value of the project as a function of the discount rate by dots for the four discount rates. connect the four points using a free hand 'smooth' curve. The curve intersects the horizontal line at a particular discount rate. What is this discount rate at which the graph intersects the horizontal axis?

Look at the graph you draw and write a short paragraph stating what the graph "shows"

Reference no: EM1313153

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