Anderson International Limited is evaluating a project in Erewhon. The project will createthe following cash flows:Year Cash Flow-$589,00001219,0002 162,0003 227,0004 206,000All cash flows will occur in Erewhon and are expressed in dollars. In an attempt toimprove its economy, the Erewhonian government has declared that all cash flowscreated by a foreign company are "blocked" and must be reinvested with thegovernment for one year. The reinvestment rate for these funds is 6 percent. AssumeAnderson uses a required return of 12 percent on this project.อa. What is the NPV of the project? (A negative answer should be indicated by a minussign. Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)b. What is the IRR of the project? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)Answer is complete but not entirely correct.a.NPV$28,171.96 xb.IRR14.24 %

a. The NPV of the project is $-$1,000. The initial investment is $589,000 and the present value of…

Answered: Anderson International Limited is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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