FINC300 HOMEWORK 3

Based on the information provided below, compute the Net Present Value (NPV) and Internal Rate of

Return (IRR) of the project (CO 3).  A Net Present Value Template is Attached.  (Hint: Don't forget to update the discount rate to the amount required for this project and add your cash flow numbers.)

Royal Dutch Shipping is planning on Investing $1,600,000 to buy a freighter.   Prepare a net present value and internal rate of return analysis based on the assumption that the freighter will be sold (salvaged) for 10% of its cost at the end of the year 5.   Assume a 10% cost of capital.  Annual operating cash flows for the project are:

Year 1:   $380,000
Year 2:   $390,000
Year 3:   $400,000
Year 4:   $410,000
Year 5:   $420,000

Prepare a loan amortization schedule based on monthly payments for the $1,600,000 if Royal Dutch Shipping can pay 10% down on a loan for $1,600,000 and can get a loan for 6% interest for 10 years (do not include this in your Net Present Value computations.  This is a separate issue.  (CO 3).  (Hint:  www.bankrate.com/calculators/mortgages/amortization-calculator.aspx )