A project that costs $4,150 to install will provide annual cash flows of $1,400

Question

A project that costs $4,150 to install will provide annual cash flows of $1,400 for each of the next 8 years.

Calculate the NPV if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Calculate the NPV if the discount rate is 15%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation / Answer

NPV @ 15%

= 1400*PVAF ( 15%,8years) -4150

= (1400*4.4873) -4150

= 6282 - 4150 i.e 2132

2) Discount rate after which the project will be rejected

= 15% + 14.62 i.e 29.62%

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