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Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$ 1,160,000 335,000 400,000 295,000 250,000 1

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$ 1,160,000 335,000 400,000 295,000 250,000 1

Essentials Of Investments
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
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Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$ 1,160,000 335,000 400,000 295,000 250,000 1 2 3. 4 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent. If Anderson uses a required return of 7 percent on this project, what are the NPV and IRR of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR as a percent.) NPV IRR %
Transcribed Image Text:Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$ 1,160,000 335,000 400,000 295,000 250,000 1 2 3. 4 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 4 percent. If Anderson uses a required return of 7 percent on this project, what are the NPV and IRR of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR as a percent.) NPV IRR %
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