Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0-$591,000 1 221,000 2 164,000 3 229,000 4 208,000 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. Assume Anderson uses a required return of 12 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0-$591,000 1 221,000 2 164,000 3 229,000 4 208,000 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. Assume Anderson uses a required return of 12 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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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am. 135.
Transcribed Image Text:Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:
Year Cash Flow
0-$591,000
1 221,000
2 164,000
3 229,000
4 208,000
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. Assume Anderson uses a required return of 12 percent on
this project.
a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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