WORR HO88! This shows what Is correct or incorrect for the work you have complet
ID: 2808778 • Letter: W
Question
WORR HO88! This shows what Is correct or incorrect for the work you have completed so far. It does not indicate completion. 3 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 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. 10 Cash flow $5,000 $1,200 $2,400 $1,600 $1,600 $1,40o $1,200 Use the NPV decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Answer is complete but not entirely correct. $ 140.37 Should it be accepted or rejected? : accepted relected Prey 3 of 10 Next>Explanation / Answer
NPV = Present Value of cash Inflows - Present Value of cash Outflows
= [ $ 1200 * 1/(1.08) ^ 1 + $ 2400* 1/(1.08) ^ 2 + $ 1600* 1/(1.08) ^ 3 +$ 1600* 1/(1.08) ^ 4 + $ 1400* 1/(1.08) ^ 5 + $ 1200* 1/(1.08) ^ 6] - $ 5000
= $ 2,323.92
Hence the correct answer is $ 2,323.92
The correct answer is Accepted
SInce the NPV is positive the project must be accepted.
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