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Problem 5-13. Problems with IRR 1. Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 - $39,200,000 1 - 3,200,000 2 -
Problem 5-13. Problems with IRR 1.
Howell Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:
Year Cash Flow
0 - $39,200,000
1 - 3,200,000
2 - 12,200,000
What is the NPV for the project if the company requires a return of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g, 32.16.)
NPV - ?
2. Should the firm accept this project?
No or Yes
- @
- ANSWER
1. using financial calculator to calculate irr
Inputs:
C0 = -39,200,000
C1 = 63,200,000. Frequency=1
C2 = -12,200,000. Frequency=1
Irr = compute
We get, Irr = 38.80%
It has only 1 irr.
NPV - 7,835,143.25 2.
2. The firm should accept this project.
Yes