Cutler Compacts will generate cash flows of $30,000 in year one, and $65,000 in year two. However, if they make an immediate investment of $20,000, they can expect to have cash streams of $55,000 in year 1 and $63,000 in year 2 instead. The interest rate is 9%. Calculate the NPV of the proposed project. Why would the IRR be a poor choice in this situation?

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The Answer of Cutler Compacts will generate cash flows of $30,000 in year one, and $65,000 in year two. However, if they make an immediate investment of $20,000, they can expect to have cash streams of $55,000 in year 1 and $63,000 in year 2 instead. The interest rate is 9%. Calculate the NPV of the proposed project. Why would the IRR be a poor choice in this situation?

Cutler Compacts Will Generate Cash Flows of $30,000 in Year