What is this project internal rate of return

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Reference no: EM13650346

You may use Excel spreadsheet in order to perform the necessary computations for this questions. The computation of the IRR is performed using the function: =IRR(range, guess) where range refers to the range where you have inserted the data on the spreadsheet and guess refers to an initial guess as to what might the IRR be [you may guess any number].
1. Consider a project with the following expected cash flows:
Year Cash flow
0 - $549,000
1 $91,000
2 $182,000
3 $374,000
a. If the discount rate is 0%, what is the project's net present value?
b. If the discount rate is 5%, what is the project's net present value?
c. What is this project's internal rate of return?
2. Consider a project with the expected cash flows:
Year Cash flow
0 - $51,000
1 $51,000
2 $87,000
3 - $87,000
a. What is this project's internal rate of return (IRR)?
b. If the discount rate is 4%, what is this project's net present value?

3. A project requiring a $1.26 million investment has a profitability index of 0.96. What is its net present value?
4. Suppose that I am trying to borrow money from you to finance my business. And suppose that I promise to repay you in two installments, one payment in two years of $15,000 and one payment in four years for $10,000. If your opportunity cost of funds is 10%, how much are you willing to lend me?
5. What is the effective annual rate of interest for a loan that has an 15% annual percentage rate, compounded monthly?

Reference no: EM13650346

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