Dr. Yuan opens a lab. The lab has an initial cost of $100,000. Expected net cash flow is $24,000 in the first year, growing by 15% per year. Net cash flow is revenue less expenses. Assume the lab has a 6 year life and there is no scrap value for the lab.
-If the time discount rate is 8%, what is the NPV of the lab? What is its IRR?
A) The NPV is $41,976; the IRR is 6.0%.
B) The NPV is $31,740; the IRR is 6.0%.
C) The NPV is $26,479; the IRR is 16.7%.
D) The NPV is $28,568; the IRR is 8.0%.
E) The NPV is $27,600; the IRR is 8.0%.
Correct Answer:
Verified
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