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mry73 says

Sir could you please explain this

Q. The following information relates to a two year project

initial investment $1 million

cash inflow year 1 $750000

cash inflow year 2 $500000

cost of capital year 1 10%

cost of capital year 2 15%

What is the NPV of project (to nearest $500)

Thanks in advance

johnmoffat says

You need to discount the time 1 flow using the 1 year discount factor at 10% from the tables.

For the time 2 flow you need to discount for 1 year at 10% and 1 year at 15%, so multiply together the 1 year factors at 10 and 15%.

sooner says

Thank you John Moffat. Thanks for the correction in spelling. Typo error and maybe exam pressure lol.

Have a bless Day .

sooner says

Goodnight John Moffat

Please walk me through this question: At an interest rate of 15% the net present valve of a project is $2,500.

At an interest rate of 20%, the net present valve falls to minus $4,000.

What is the Internal Rate of Return of the Project

johnmoffat says

The net present value (not valve ), falls by 6,500 over a chang of 5%’s.

At 15% the NPV is 2500, and so we want it to fall by 2,500 to get an NPV of zero.

A fall of 2,500 will be 2500/6500 x 5%.

If you add this to the 15%, then you will have the IRR.