1) Calculation of NPV AND IRR

DESCRIPTION YEAR0 YEAR 1 YEAR2 YEAR3

Purchase of computer -100000
Annual maintenance costs -20000 -20000 -20000

annual cash inflow 45000 45000 45000

Net cash flow -100000 25000 25000 25000

Present value of net cash flow@ -100000 21739.130435 18903.591682 16437.905811
Net present value@15% -16196.12255

CALCULATION OF IRR
DESCRIPTION YEAR0 YEAR 1 YEAR2 YEAR3
Purchase of computer $ (100,000.00)
Annual maintenance costs $ (20,000.00) $ (20,000.00) $ (20,000.00)

annual cash inflow $ 45,000.00 $ 45,000.00 $ 45,000.00

Net cash flow $ (100,000.00) $ 25,000.00 $ 25,000.00 $ 25,000.00

Present value of net cash flow@15%$ (100,000.00) $ 23,364.49 $ 21,835.97 $ 20,407.45
Net present value@7%(ASSUMED) $ 2,504.94

Internal rate of return

LOWER RATE+[+NPV/(+NPV-(-NPV)]*(Highier rate-lower rate)
IRR 1%
0.08071569679

AS Net present value of all cash flows is negative means cash inflows are less as
compared to the today investment made therefore project have to be rejected
because its not fruitful
2)
 YEAR4 YEAR5

-20000 -20000

45000 45000

25000 25000
14293.83114 12429.418382

YEAR4 YEAR5

$ (20,000.00) $ (20,000.00)

$ 45,000.00 $ 45,000.00

$ 25,000.00 $ 25,000.00
$ 19,072.38 $ 17,824.65

ier rate-lower rate)

 calculation of NPV
A) DESCRIPTION YEAR0
Purchase of Truck $ (260,000.00)
Purchase of additional Truck

Annual cash inflow

Net cash flow $ (260,000.00)

Present value of net cash flow@14% $ (260,000.00)
Net present value@15% $ 171,148.29

B) Company must have to accept this project

AS Net present value of all cash flows is positivetive means cash inflows are gre
to the today investment made therefore project have to be accepted because
 YEAR 1 YEAR2 YEAR3 YEAR4 YEAR5

$ (42,000.00)

$ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00

$ 135,000.00 $ 93,000.00 $ 135,000.00 $ 135,000.00 $ 135,000.00

$ 118,421.05 $ 71,560.48 $ 91,121.15 $ 79,930.84 $ 70,114.77

eans cash inflows are greator as compared

e to be accepted because its more fruitful