Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 -$1,210,000 1 385,000 2 450,000 3 345,000 4 300,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. If the company uses a required return of 10 percent on this project, what are the NPV and IRR of the project?

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 -$1,210,000 1 385,000 2 450,000 3 345,000 4 300,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 5 percent. If the company uses a required return of 10 percent on this project, what are the NPV and IRR of the project?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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