Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$589,000 0 1 219,000 2 162,000 3 227,000 4 206,000 134 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 6 percent. Assume Anderson uses a required return of 12 percent on this project. a. What is the NPV of the project? (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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. b. Answer is complete but not entirely correct. NPV IRR $ 28,171.96 X 14.24%

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$589,000 0 1 219,000 2 162,000 3 227,000 4 206,000 134 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 6 percent. Assume Anderson uses a required return of 12 percent on this project. a. What is the NPV of the project? (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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. b. Answer is complete but not entirely correct. NPV IRR $ 28,171.96 X 14.24%

Name: Anderson International Limited is evaluating a project in Erewhon. Th
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Description: Anderson International Limited is evaluating a project in Erewhon. The project will createthe following cash flows:Year Cash Flow-$589,00001219,0002 162,0003 227,0004 206,000mtAll cash flows will occur in Erewhon and are expressed in dollars. In an

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter16: Country Risk Analysis

Section: Chapter Questions

Problem 5ST

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