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Homework answers / question archive / Light Sweet Petroleum, Inc, is trying to evaluate a generation project with the following cash flows: Year Cash Flow 0 −$45,000,000 1 71,000,000 2 −15,000,000 What is the IRR? If the company requires a return of 12 percent on its investments, should it accept this project? Why? Assume an individual makes a lump sum investment at the beginning of year one of $20,581, the present value of which is $20,581

Light Sweet Petroleum, Inc, is trying to evaluate a generation project with the following cash flows:

Year Cash Flow

0 −$45,000,000

1 71,000,000

2 −15,000,000

What is the IRR?

If the company requires a return of 12 percent on its investments, should it accept this project? Why?

Assume an individual makes a lump sum investment at the beginning of year one of $20,581, the present value of which is $20,581. The investor's discount rate, for an alternative safe investment, is 6.75 percent after tax. The expected return on this investment (received at each year-end) is as follows.

Year 1: 1,562

Year 2: 13,949

Year 3: 18,151

Year 4: 10,676

Year 5: 6,463

What is the net present value of the investment under consideration?

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