Answer:
Wind turbine
NPV = $82,629.57
IRR = 10%
PVI = 1.09
Biofuel
NPV = $128,431.68
IRR = 12%
PVI = 1.14
Explanation:
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
Internal rate of return is the discount rate that equates the after-tax cash flows from an investment to the amount invested
NPV and IRR can be calculated using a financial calculator
Wind Turbine
Cash flow in year 0 = $-887,600,
Cash flow in year 1 - 4 = 280,000
I = 6%
NPV = $82,629.57
IRR = 10%
Biofuel
Cash flow in year 0 = $-911,100
Cash flow in year 1 - 4 = $300,000
I = 6%
NPV = $128,431.68
IRR = 12%
present value index = 1 + (NPV / initial cost of the the project)
Wind turbine
1 + ($82,629.57 / $-887,600 = 1.09
Biofuel
1 + ( $128,431.68 / $911,100) = 1.14
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
To find the IRR using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the IRR button and then press the compute button.
