00:04
Hello students, in this question, we have to compute the npv irr.
00:08
So, first of all, we will be computing the npv, the formula of npv is equal to cfo, cash flow of 0 year plus cf plus 1 divided by 1 plus r to the power 1, cf2, 1 plus r to the power 2, cf3, 1 plus r to the power 3, plus cf4, plus 1 plus r to the power 4.
00:39
So, putting up the values here, here for project x, all the npvs are in positive.
00:49
So, we can write the cash inflow, 0 minus 10 ,000 plus 6500 divided by, rate is 12%.
01:01
So, 0 .12 to the power 1 plus, next day cash flow is 3500 divided by 1 plus 0 .12 to the power 2, plus 3000 divided by 1 plus 0 .1 to the power 2, plus 3500 plus 1 plus 0 .1 to the power 3, plus.
01:34
So, upon solving this, we get the project x npv will be 2238 .47.
01:42
So, project y, we're going to compute.
01:45
As for project y, the first year is negative and the following years are positive.
01:50
So, we need to subtract the initial investment from some of the discounted cash flow.
01:55
So, it will be minus 10 ,000 divided plus 6500 divided by 1 plus 0 .12 to the power 1, plus 3500 divided by 1 plus 0 .12 to the power 2, plus 3000 divided by 1 plus 0 .12 to the power 3, plus 3500 divided by 1 plus 0 .12 to the power.
02:33
So, upon solving this, we get npv for project y is 1238 .47.
02:46
Now, we need to compute the irr.
02:49
So, for computing irr, we use discount...