Net Present Value Method , Internal Rate of Return Method , and Analysis The man
ID: 2371990 • Letter: N
Question
Net Present Value Method, Internal Rate of Return Method, and Analysis
The management of Quest Media Inc. is considering two capital investment projects. The estimated net cash flows from each project are as follows:
The radio station requires an investment of $770,850, while the TV station requires an investment of $1,475,730. No residual value is expected from either project.
Required:
1a. Compute the net present value for each project. Use a rate of 10% and the present value of an annuity of $1 in above table. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest whole dollar.
1b. Compute a present value index for each project. If required, round your answers to two decimal places.
2. Determine the internal rate of return for each project by (a) computing a present value factor for an annuity of $1 and (b) using the present value of an annuity of $1 in above table. If required, round your present value factor answers to three decimal places and internal rate of return to the nearest whole percent.
Need help finding these last 4 blanks... Can you please show your work?
Year Radio Station TV Station 1 $270,000 $570,000 2 270,000 570,000 3 270,000 570,000 4 270,000 570,000Explanation / Answer
RADIO SATION
present value of annnualnet cash flows = sumof(cash flowofeach year * prevesnt value at annuity fromabove table)
= 270000 * 0.909 + 270000 * 1.736 + 270000 * 2.487 + 270000* 3.170
= 2241540
intial investment = 770850
net present value = 1470690
present value index = 2241540/770850 = 2.91
present value factor = 8.302
0 = -770850+270000/(1+IRR)+270000/(1+IRR)^2+270000/(1+IRR)^3+270000/(1+IRR)^4
IRR = 15%
for TV STATION
present value of annnualnet cash flows = sumof(cash flowofeach year * prevesnt value at annuity fromabove table)
= 570000 * 0.909 + 570000 * 1.736 + 570000 * 2.487 + 570000* 3.170
= 4732140
intial investment = 1475730
net present value = 3256410
present value index= 4731140/1475730 = 3.21
present value factor = 8.302
0 = -770850+570000/(1+IRR)+570000/(1+IRR)^2+570000/(1+IRR)^3+570000/(1+IRR)^4
IRR = 20%