Q4TI
ExpertverifiedCornell Company is considering a project with an initial investment of $596,500 that is expected to produce cash inflows of $125,000 for nine years. Cornell’s required rate of return is 12%.
14. What is the NPV of the project?
15. What is the IRR of the project?
16. Is this an acceptable project for Cornell?
14. The NPV of the company is $69.531.25.
15. The Annuity factor is 4.772, @15% for 9 years. So the IRR of the project is 15%.
16. This project should be accepted by the company.
 Net Cash Inflow  x  Annuity PV Factor (i = 12%, n = 9)  Present Value 
Present value of annuity (a)  $125,000  x  5.32825  $666,031.25 
Initial investment (b) 


 $596,500.00 
Net present value (ab) 


 $69,531.25 
The NPV of the company is greater than zero and the IRR is greater than required rate of return. Thus the company should accept the project.
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