Nanosoft Corporation is thinking about marketing a new software product

a) NPV (5.7%) = -4960000+1080000/0.057*(1-1/1.057^10)-99000/0.057

=$1,366,263.33

The firm should undertake the project as the NPV is positive

NPV (1.6%) = -4960000+1080000/0.016*(1-1/1.016^10)-99000/0.016

= - $1,240,101.10 (Firm should not undertake project at 1.6% discount rate)

NPV (14.3%) = -4960000+1080000/0.143*(1-1/1.143^10)-99000/0.143

= - $84,242.76 (Firm should not undertake project at 14.3% discount rate)

b) IRR (r) of the project is given by

-4960000+1080000/r*(1-1/(1+r)^10)-99000/r = 0

Since the project has positive NPV at 5.7% but negative NPV at 1.6% and 14.3%

project has two IRRs , one between 1.6% and 5.7% and another between 5.7% and 14.3%

Solving r = 0.021137 or 2.1137% and 0.13801532 or 13.8015%

So, there are two IRRs : 2.1137% and 13.8015%

c) The IRR rule indicates that the firm's cashflows changes sign twice , first from Negative to positive from initial negative cash outflow to 1st year positive cashinflow of $1080000-$99000 =$981000

and then from positive cashinflow in year 10 of $1080000 to negative cashoutflow of  $99000 in year 11

So there should be two IRRs