NPV Item

All cash flows will occur in Mexico and are expressed in dollars. In an attempt to improve its economy, the Mexican government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 3 percent.

If the company uses a required return of 15 percent on this project, what are the NPV and IRR of the project?

0 -1350000 1 525000 2 590000 3 485000 4 440000

I would imagine you just delay each of the inflows (#1-4) by a year and multiply them by 1.03. So it would look like:

0: -13500000

1: 0

2: 540,750

3: 607,700

4: 499,550

5: 453,200

Dont have my calc but via excel im getting NPV of -26,611.19 IRR of 14.1920%