Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:Year0Cash Flow-$ 588,000.1218,000161,000226,000205,000All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian governmenthas declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one yearThe reinvestment rate for these funds is 5 percent. Assume Anderson uses a required return of 12 percent on this project.a. What is the NPV of the project?Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answerto 2 decimal places, e.g., 32.16.b. What is the IRR of the project?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.a. NPVb. IRR

NPV is calculated using the NPV function: =NPV(rate,values)-initial cost IRR is calculated as:…

Answered: Anderson International Limited is…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6EA: The management of Kawneer North America is considering investing in a new facility and the following...

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Butler International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 –$ 1,170,000 1 345,000 2 410,000 3 305,000 4 260,000 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 3 percent. If the company uses a required return of 7 percent on this project, what are the NPV and IRR of the project? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent.)
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 –$ 1,170,000 1 345,000 2 410,000 3 305,000 4 260,000 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 3 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.)
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$589,000 0 1 219,000 2 162,000 3 227,000 4 206,000 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 6 percent. Assume Anderson uses a required return of 12 percent on this project. อ 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.) Answer is complete but not entirely correct. a. NPV $ 28,171.96 x b. IRR 14.24 %
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