A project that provides annual cash flows of $2,700 for nine years costs $8,800

Question

A project that provides annual cash flows of $2,700 for nine years costs $8,800 today.

At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

At a required return of 28 percent, what is the NPV of the project? (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Requirement 1:

At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

IRR=27.1% . That is at this interest one will be indifferent.

Particulars Year Amount PV@9% PV@28% PV@IRR(@27.1%) Cash flow 1 2700 2477.06 2109.375 2124.312 2 2700 2272.54 1647.949 1671.370 3 2700 2084.9 1287.46 1315.004 4 2700 1912.75 1005.828 1034.622 5 2700 1754.81 785.8034 814.022 6 2700 1609.92 613.9089 640.458 7 2700 1476.99 479.6163 503.901 8 2700 1355.04 374.7003 396.460 9 2700 1243.16 292.7346 311.928 Total PV 16187.2 8597.376 8812.075

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