Quantitative Methods - Quantitative Methods Section 1

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6. The incremental after-tax cash flows of a project are given below:

Year 01234
Cash flow (€)   -50,00025,00020,000  10,0003,000

  • Option : A
  • Explanation : Enter the given cash flows and the given discount rate into a financial calculator and solve for NPV. CF0 = –50,000, CF1 = 25,000, CF2 = 20,000, CF3 = 10,000, CF4 = 3,000, i = 12%. Compute PV. The NPV is –2,710.
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10. A project requires an initial outlay of $750,000. It is expected to produce cash flows of $200,000 in the first year, $300,000 in the second year, and $400,000 in the third year. The cost of capital for this project is 10%. What is the internal rate of return of the project?

  • Option : A
  • Explanation : Using a financial calculator, enter the following cash flows to compute IRR. CF0 = -750,000, CF1 = 200,000, CF2 = 300,000, CF3 = 400,000, CPT IRR = 8.65%.
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