A project that provides annual cash flows of $2,150 for nine years costs $8,900

Question

A project that provides annual cash flows of $2,150 for nine years costs $8,900 today. Requirement 1: At a required return of 8 percent, what is the NPV of the project? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $ Requirement 2: At a required return of 24 percent, what is the NPV of the project? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).) NPV $ Requirement 3: At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Discount rate %

Explanation / Answer

Requirement 1: NPV at 8%= -8900+2150PVIFA(8%,9)= $ 4530.81 Requirement 2: NPV at 24%= -8900+2150PVIFA(24%,9)= $-1234.171 Requirement 3 IRR, 8900=2150PVIFA(r,9) r= 19.1671%

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