Answer to Question #222396 in Finance for Warri

Question #222396

As investment with a 3year life and a cost of #120000 generates revenue of #25000 in year 1 #45000 in year 2 and #65000 in year 3. If the discount rate 8%

(i) what is the NPV of the investment.

(ii) state whether the investment should be accepted or not and why.

(iii) using 12% as your second discount rate, to solve the remaining part of the question under IRR.


1
Expert's answer
2021-08-02T15:12:02-0400

Solution


i.) PV=120000


YEAR 1=


YEAR 2=


YEAR 3=



NPV1= -6672.5


ii.) The investment should not be accepted because the NPV is a negative.


iii.) Using 12% as the discount rate

PV= 120000


1st


2nd


3rd


NPV2

= -15539.13



IRR %


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