Mr. Thompson was offered a join venture opportunity. The project will last for five years. In the first year, Mr. Thompson put $50,000 into the joint venture fund for business operations. From the second year, the project is expected to start receiving revenues from production. Mr. Thompsonís share of revenues will be $10,000, $15,000, $20,000, and $20,000 each respective year. Assuming the current inflation rate is 3.82% each year, what is Mr. Thompsonís Return of Investment and Net Present Value for this project? What is the net value at the end of the project?
[Answer: IRR=10.14%; NPV=$8,636; FV=$10,033]
In the Cash Flows worksheet, type in -50000, 10000, 15000, 20000, 20000 from row 1 to row 5 respectively. Click row 1, keep on pressing left mouse button, drag down until row 5. You will see the IRR=10.14%. Next, enter 3.82 in the Discount Rate box. You get new NPV and FV instantly.