A project that provides annual cash flows of $16,600 for eight years costs $72,0

Question

A project that provides annual cash flows of $16,600 for eight years costs $72,000 today.

What is the NPV for the project if the required return is 7 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and 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 percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

NPV when required rate is 7%

NPV=Cash Inflow - Cash Outflow

Cash Inflow=16600*5.9713

=99,123.58

NPV=Cash Inflow-Cash Outflow

=99,123.58-72,000

=$27123.58

NPV when require rate is 19%

NPV =Cash Infow - Cash Outflow

Cash Inflow=16600*3.9544

=65643.04

NPV=Cash Inflow- Cash Outflow

=65643.04-72,000

=-$6356.96

Indifferent Discount rate

NPV Should be Zero divide the cost with the annual cash flow.

=$72000/$16600

=4.33734939%

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