Frost Company forecasts the launch of its new product with the following projected cash flows for each year. Initial investment in the project (including working capital) is $50,000. No salvage value at the end of the project.
Year Cash Flow Amount
1 $22,500
2 $21,000
3 $12,000
4 $8,500
1. Using an opportunity cost of capital of 12%, what is the Net Present Value? [Excel Formula = NPV]
[Hint: NPV of Cash Flows – Initial Investment = Net Present Value]
2. What would be the project IRR using the above data? [EXCEL Formula = IRR]