What is the first period cash flow for the following project if its initial cash flow is -$4,500,000 and it is expected to provide operating cash flows of $750,000 in year 2 and $3,000,000 in year 3 with an IRR of 10%? answer choices $842,727

Finance Dec 03, 2020

What is the first period cash flow for the following project if its initial cash flow is -$4,500,000 and it is expected to provide operating cash flows of $750,000 in year 2 and $3,000,000 in year 3 with an IRR of 10%?

answer choices

$842,727.27

$1,788,842.98

$162,622.09

$1,472,727.27

Expert Solution

IRR is the rate at which NPV=0

[X/(1+10%)]+[750000/(1+10%)^2)]+[3000000/(1+10%)^3)]=4500000

[X/1.1]+619834.71+2253944.40=4500000

X/1.1=4500000-2873779.11=1626220.89

X=1626220.89*1.1=1788842.98

Option b is correct

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote