Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year 0 1 2 Cash Flow -$ 580,000 210,000 153,000 218,000 197,000 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. Assume Anderson uses a required return of 11 percent on this project. a. What is the NPV of the project? Note: A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the IRR of the project? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. NPV b. IRR 96

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year 0 1 2 Cash Flow -$ 580,000 210,000 153,000 218,000 197,000 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. Assume Anderson uses a required return of 11 percent on this project. a. What is the NPV of the project? Note: A negative answer should be Indicated by a minus sign. Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the IRR of the project? Note: Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. NPV b. IRR 96

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter14: Multinational Capital Budgeting

Section: Chapter Questions

Problem 3ST

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