Frankies,LLC. is thinking about a project that has an initial after-tax outlay o

Question

Frankies,LLC. is thinking about a project that has an initial after-tax outlay  of $150,000. The relevant future cash inflows from its four-year project for years 1 through 4 are: $60,000, $70,000, $75,000 and $70,000. Frankies wants to base their decision using the net present value method and has a discount rate of 12%. Will Frankies accept the project?

Frankies rejects the project because the NPV is about -$22,375.73.                             
           Frankies rejects the project because the NPV is about -$2,375.60.                             
           Frankies rejects the project because the NPV is about -$12,375.60.                             
           Frankies accepts the project because the NPV is greater than $10,000.00.        
Frankies,LLC. is thinking about a project that has an initial after-tax outlay  of $150,000. The relevant future cash inflows from its four-year project for years 1 through 4 are: $60,000, $70,000, $75,000 and $70,000. Frankies wants to base their decision using the net present value method and has a discount rate of 12%. Will Frankies accept the project?

Frankies rejects the project because the NPV is about -$22,375.73.                             
           Frankies rejects the project because the NPV is about -$2,375.60.                             
           Frankies rejects the project because the NPV is about -$12,375.60.                             
           Frankies accepts the project because the NPV is greater than $10,000.00.        
Frankies,LLC. is thinking about a project that has an initial after-tax outlay  of $150,000. The relevant future cash inflows from its four-year project for years 1 through 4 are: $60,000, $70,000, $75,000 and $70,000. Frankies wants to base their decision using the net present value method and has a discount rate of 12%. Will Frankies accept the project?

Frankies rejects the project because the NPV is about -$22,375.73.                             
           Frankies rejects the project because the NPV is about -$2,375.60.                             
           Frankies rejects the project because the NPV is about -$12,375.60.                             
           Frankies accepts the project because the NPV is greater than $10,000.00.        
Frankies rejects the project because the NPV is about -$22,375.73. Frankies rejects the project because the NPV is about -$2,375.60. Frankies rejects the project because the NPV is about -$12,375.60. Frankies accepts the project because the NPV is greater than $10,000.00. Frankies rejects the project because the NPV is about -$22,375.73.                             
           Frankies rejects the project because the NPV is about -$2,375.60.                             
           Frankies rejects the project because the NPV is about -$12,375.60.                             
           Frankies accepts the project because the NPV is greater than $10,000.00.

Explanation / Answer

YEARS

CASHFLOWS

DISCOUNTING FACTOR

P.V @12%

0

(150000)

(150000)

1

60000

0.8929

53574

2

70000

0.7972

55804

3

75000

0.7118

53385

4

70000

0.6355

44485

NPV =

57248

SINCE NPV IS POSITIVETHE PROJECT IS NOT VIABLE AND THEREFORE SHOULD BE ACCEPTED

ANSWER :- OPTION

YEARS

CASHFLOWS

DISCOUNTING FACTOR

P.V @12%

0

(150000)

(150000)

1

60000

0.8929

53574

2

70000

0.7972

55804

3

75000

0.7118

53385

4

70000

0.6355

44485

NPV =

57248

SINCE NPV IS POSITIVETHE PROJECT IS NOT VIABLE AND THEREFORE SHOULD BE ACCEPTED

ANSWER :- OPTION

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