If, as a result of the NPV analysis, you calculate $1 as your NPV amount, would
ID: 2658879 • Letter: I
Question
If, as a result of the NPV analysis, you calculate $1 as your NPV amount, would you still take on that project? Why or why not? What does that extra 1 dollar say about IRR versus expected return? If, as a result of the NPV analysis, you calculate $1 as your NPV amount, would you still take on that project? Why or why not? What does that extra 1 dollar say about IRR versus expected return? If, as a result of the NPV analysis, you calculate $1 as your NPV amount, would you still take on that project? Why or why not? What does that extra 1 dollar say about IRR versus expected return?Explanation / Answer
NPV of a project can be defined or calculated as the difference between the Present value of Future Cash inflows and Initial Investment made in the project.A project is chosen of the NPV is positive.
Since the NPV of the project is positive $1 which is positive hence it should be chosen as it represent the profitablility of the project taking all the considerations of the future aspects.
The amount one would anticipate receiving on an investment that has various known or expected rate of return While the IRR is based on actual cash flows to be earned in the future in order to equate the Initial investment.
Hence IRR is the rate when
Initial Investment=Present Value of future Cash inflows