I need some help with this question please. Understanding the IRR and NPV Axis C
ID: 2674577 • Letter: I
Question
I need some help with this question please.
Understanding the IRR and NPV Axis Chemical Co lost a tot of its accounting information because of a problem with its electronic record-keeping system. Its CFO know that the IRR of project Alpha is 13.8%; however, the CFO does not know how much Axis Chemical Co, originally invested in the project. The cash flow project Alpha are listed as follows: Project Alpha has the same risk as a firm's average project. The company has a WACC of 10%. Based on this information, the project's NPV is . A project IRR will if the amount of the project's initial investment increases and everything else is unaffected.Explanation / Answer
irr=13.% original investment = unknown cash flows= yr1=$375,000 yr2=$425,000 yr3=$400,000 yr1=$400,000 npv = -initial cost +c(n)/(1+r)^n NPV Calculation at 10% wacc Year Net Cash Flows PVIF @ 10% Present Value 1 $375,000 0.909 2 $425,000 0.826 3 yr3=$400,000 0.751 4 yr4=$400,000 0.683