NPV and IRR: Unequal Annual Net Cash InflowsAssume that Goodrich Petroleum Corporation is evaluating a capital expenditure proposal that has the following predicted cash flows:Initial Investment$(58,220)Operation Year 123,000Year 231,000Year 322,000Salvage0 a. Using a discount rate of 10 percent, determine the net present value of the investment proposal.$Answer (Round answer to the nearest whole number.)b. Determine the proposal's internal rate of return. (Refer to Appendix 12B if you use the table approach.)Round to the nearest percent. (Example: 0.15268 = 15%)Answer%

Initial Investment =$ 58,220 Discount Rate (R) = 10% Present value factor = 1(1+R)n n = Time period a.: Schedule: NPV = Present Value of Cash Flows - Initial investment = $(63,056.3 - 58,220) = $ 4,836.3~ $ 4,836 b.: $4,836 =∑n=0376,000(1+IRR)3 IRR =15%

Answered: ssume that Goodrich Petroleum…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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NPV and IRR: Unequal Annual Net Cash Inflows
Assume that Goodrich Petroleum Corporation is evaluating a capital expenditure proposal that has the following predicted cash flows:

Initial Investment	$(58,220)
Operation
Year 1	23,000
Year 2	31,000
Year 3	22,000
Salvage	0

a. Using a discount rate of 10 percent, determine the net present value of the investment proposal.
$Answer (Round answer to the nearest whole number.)

b. Determine the proposal's internal rate of return. (Refer to Appendix 12B if you use the table approach.)
Round to the nearest percent. (Example: 0.15268 = 15%)
Answer%

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