T needs you to analyze the impact a new project that will cause its cash flows...

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Finance

T needs you to analyze the impact a new project that will causeits cash flows to increase $8,000 over last year’s, and continue togrow at a constant rate of 10% per year for the foreseeable future.The discount rate is 20%. You need to analyze this in threeways.
Calculate the NPV and IRR of this new project based on aninitial investment cost of $45,000 and the change in cash flowseach year, assuming the growth continuesforever.
Find the NPV and IRR of this project if the project onlygenerates cash flows for 10 years.
Use an embedded function in Excel to calculate the NPV of theproject if the cash flows had zero growth, and theproject only generates cash flows for 20years

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3.7 Ratings (710 Votes)

Scenario1If the growth continues forever the present value of all thefuture cash flow As per DDM model would See Answer

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T needs you to analyze the impact a new project that will causeits cash flows to increase $8,000 over last year’s, and continue togrow at a constant rate of 10% per year for the foreseeable future.The discount rate is 20%. You need to analyze this in threeways.Calculate the NPV and IRR of this new project based on aninitial investment cost of $45,000 and the change in cash flowseach year, assuming the growth continuesforever.Find the NPV and IRR of this project if the project onlygenerates cash flows for 10 years.Use an embedded function in Excel to calculate the NPV of theproject if the cash flows had zero growth, and theproject only generates cash flows for 20years