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?

Question

Business

Bello

15 February, 20:02

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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Aylin Leonard · Answer 1

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