Computation of npv-project discount rate

Reference no: EM13827907

Problem:

You are considering making an investment in a project. The initial cost (I₀) equals $1,200. In return for this initial outlay, you will own the rights to three future cash flows: CF₁ = $300, CF₂ = $400, and CF₃ = $500. First, if the appropriate discount rate for this investment is 12%, what is the NPV for this project? Second, what discount rate would create a situation such that NPV = 0, i.e. what discount rate would make NPV = 0? Make sure that you show your explanation for part two of this question with an NPV calculation - do not just provide a rate. Third, what is the IRR for this project?

Additional Information:

The question is from Finance as well as it is about computation of NPV if the project's discount rate is 12%, the discount rate if NPV = 0 and IRR for the project need to be computed. These have been computed in detail in the solution.

Reference no: EM13827907

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