Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Suppose your firm is considering investing in a project with the cash flows show

ID: 2787447 • Letter: S

Question

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively.

  

  

Use the NPV decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.)


Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively.

Explanation / Answer

Project should be rejected as NPV is negative Statement showing Cash flows Particulars Time PVf 12% Amount PV Cash Outflows                        -                        1.00                       (361,000.00)                       (361,000.00) PV of Cash outflows = PVCO                       (361,000.00) Cash inflows                    1.00                 0.8929                           65,200.00                           58,214.29 Cash inflows                    2.00                 0.7972                           83,400.00                           66,485.97 Cash inflows                    3.00                 0.7118                         140,400.00                           99,933.95 Cash inflows                    4.00                 0.6355                         121,400.00                           77,151.89 Cash inflows                    5.00                 0.5674                           80,600.00                           45,734.60 PV of Cash Inflows =PVCI                         347,520.70 NPV= PVCI - PVCO                         (13,479.30)

Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Chat Now And Get Quote