A firm evaluates all of its projects by applying the NPV decision rule. A projec
ID: 2719977 • Letter: A
Question
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:
What is the NPV for the project if the required return is 10 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
What is the NPV for the project if the required return is 26 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.)
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:
Explanation / Answer
Solution:
Yes, the project can be accepted as the NPV of the project is positive,
No, the project should not be accpted as, the NPV of the project is negative
Year 0 Year 1 Year 2 Year 3 Initial Investment -28,200 12,200 15,200 11,200 Present value of $ 1 @ 10 % 1 0.909 0.826 0.751 Present Value of Cashflows 11,090.91 12,561.98 8,414.73 Total Present Value of Cashflows 32,067.62 NPV = Total Present Value of Cashflows - Initial Investment 3,867.62Related Questions
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