A project that provides annual cash flows of $17,100 for nine years costs $77,00

Question

A project that provides annual cash flows of $17,100 for nine years costs $77,000 today. What is the NPV for the project if the required return is 8 percent? (Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ At a required return of 8 percent, should the firm accept this project? Accept Reject What is the NPV for the project if the required return is 20 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16)) NPV $ At a required return of 20 percent, should the firm accept this project? Accept Reject At what discount rate would you be indifferent between accepting the project and rejecting it? (Round your answer to 2 decimal places. (e.g., 32.16)) Discount rate %

Explanation / Answer

NPV at 8% =-77000+PV(8%,9,-17100) = 29,821.78

At 8%, as the NPV is positive, the company should accept the project.

NPV at 20% =-77000+PV(20%,9,-17100) = -8,070.47

At 20%, as the NPV is negative, the company should NOT accept the project.

Hope this helped ! Let me know in case of any queries.

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