A project your firm is considering requires an investment today of $1,800 and is forecasted to generate the following cash flows at years 1, 2, 3, and 4 (note the last one is negative).Time period in
A project your firm is considering requires an investment today of $1,800 and is forecasted to generate the following cash flows at years 1, 2, 3, and 4 (note the last one is negative).
Time period in years
1 2 3 4
Cash flow:2,000 2,000 2,000 -3,000
Your firm has decided the appropriate cost of capital for the project is 9%.
a. What guidance, if any, does the IRR method provide as to whether the project should be accepted? Please justify or explain your answer. Please make sure your supporting work shows either algebra or financial calculator input limited to the five financial time value of money keys (N, I or I/YR depending on calculator model, PV, PMT, and FV) showing excel input or output will not earn credit.
b. What guidance, if any, does the NPV method provide as to whether the project should be accepted? Please justify or explain your answer. Please make sure your supporting work shows either algebra or financial calculator input limited to the five financial time value of money keys (N, I or I/YR depending on calculator model, PV, PMT, and FV)
