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3 November, 13:27

Heap Corporation is considering an investment in a project that will have a two year life. The project will provide a 10% internal rate of return, and is expected to have a $40,000 cash inflow the first year and a $50,000 cash inflow in the second year. What investment is required in the project?

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  1. 3 November, 13:37
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    The Investment required is 77686

    Explanation:

    The required investment is the actual amount of the 2 inflows that we will receive in the future

    Investment (Present Value) = ∑A / (1+r) ⁿ

    A=cash inflows

    r = internal rate of return

    n = time

    Investment=∑A / (1+r) ⁿ

    Investment = $40,000 / (1+0,10) ¹ + $50,000 / (1+0,10) ²

    Investment=36364+41322

    Investment=77686
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