finance Last Tuesday Green Caterpilar Garden Supplies Inc lo

Last Tuesday, Green Caterpilar Garden Supplies Inc. lost a portion of its planning and financial data when its server and its backup server crashed. The company\'s CFO remembers that the internal rate of return (IRR) of Project Lambda is 13.8%, but he can\'t recal how much Green Caterpillar originally invested in the project nor the project\'s net present vaue (NPV). However, he found a note that contained the annual net cash flows expected to be generated by Project Lambda. They are: Year Cash Flow Year 1 $2,200,000 Year 2 $4,125,000 Year 3 $4,125,000 Year4 $4,125,000 has asked you to compute Project Lambda\'s initial investment using the information currently available tro you. He has offered the following suggestions and observations A project\'s IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash infiows equals the discounted value of its cash outflows-when the cash flows are discounted using the project\'s IRR average project, which means that Project Lambda\'s net cash flows can be discounted using Green Caterpillar\'s 7% WA Given the data and hints, Project Lambda\'s initial investment is trounded to the nearest whole dollar). , and its NPV is A project\'s IRR wit f the project\'s cash inflows decrease, and everything else is unaffected stay the same decsease 5 6 8

Solution

the projects IRR is 13.8%. cash inflows in year 1 is $2,200,000, in year 2 is $4,125,000, in year 3 and 4 also $4,125,000.

to calculate IRR first we should calculate factor value.

Factor value= Initial investment/ Average cash inflow (13.8% (14%) is existed at 2.914 in the table 4)

2.914= initial investment/ 3,643,750

now initial investment is= 2.914*3,643,750

investment= $10,617,887

to calculate NPV we must require the discounting factor value, but you have not provided it.

a projects IRR will be decreases if the cash inflows are decreases.