You can also then use Excel to do the NPV calculation, use .12 for the rate, then select the cash flows for the second data point.
For your NPV first:
NPV= (100000) + 20000/(1+ 12%)^1 + 30000/(1+12%)^2 + 40000/(1+12%)^3 + 50000/(1+12%)^4...
Solve it and you get your NPV
For your IRR:
You have to assume NPV=0, then
0= (100000)+ 20000/(1+IRR)+.......
You have to use EXCEL for solving this otherwise it will be tough to get an accurate value
Remember higher the IRR better the project and try solving both NPV and IRR in excel only
The expected cash flow of a project is as follows :
YEAR ---- CASH FLOW
0 ---- (-100,000)
1 ---- 20,000
2 ---- 30,000
3 ---- 40,000
4 ---- 50,000
5 ---- 30,000
Q. If the Cost of Capital is 12%. Calculate Internal Rate of Return (IRR) and Net Present Value (NPV)?
Step by Step approach to the answer would be appreciated.
Thanks in Advance :)
