A firm evaluates all of its projects by applying the NPV decision rule. A projec

Question

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

Year 0 -$28,600

Year 1 $12,600

Year 2 $15,600

Year 3 $11,600

What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

What is the NPV for the project if the required return is 25 percent?

What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

What is the NPV for the project if the required return is 25 percent?

Explanation / Answer

NPV of the project@11% Year cash flow PV@11% NPV 0        -28,600 1        -28,600 1          12,600 0.900901          11,351 2          15,600 0.811622          12,661 3          11,600 0.731191            8,482            3,894 NPV of the project@25% Year cash flow PV@25% NPV 0        -28,600 1        -28,600 1          12,600 0.8          10,080 2          15,600 0.64            9,984 3          11,600 0.512            5,939           -2,597

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