At a required return of 9 percent, what is the NPV of the project? ( Do not roun

Question

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).)

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

NPV = -8800 + 2700/(1+ .09)^1 + 2700/(1+ .09)^2 + 2700/(1+ .09)^3 + 2700/(1+ .09)^4 + 2700/(1+ .09)^5 + 2700/(1+ .09)^6 + 2700/(1+ .09)^7 + 2700/(1+ .09)^8 + 2700/(1+ .09)^9 = 7387.17

Part B:

NPV = - 8800 + + 2700/(1+ .28)^1 + 2700/(1+ .28)^2 + 2700/(1+ .28)^3 + 2700/(1+ .28)^4 + 2700/(1+ .28)^5 + 2700/(1+ .28)^6 + 2700/(1+ .28)^7 + 2700/(1+ .28)^8 + 2700/(1+ .28)^9 = -202.64

Part C:

Discount Rate = 27.15%

Thanks.

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