A project that provides annual cash flows of $17,800 for eight years costs $84,0

Question

A project that provides annual cash flows of $17,800 for eight years costs $84,000 today. What is the NPV for the project if the required return is 7 percent? (Round your answer to 2 decimal places. (e.g., 32.16))

What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

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))

What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

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))

Explanation / Answer

Rate of return r 8.00% 19.00% Formula Case -> A B Cash flow PV of Cash flow Year Cash flow PV of cash flow Cash flow PV of cash flow A A/(1+r)^0 0 -84,000 $ (84,000.00) -84,000 $ (84,000.00) B B/(1+r)^1 1 17,800 $ 16,481.48 17,800 $ 14,957.98 C C/(1+r)^2 2 17,800 $ 15,260.63 17,800 $ 12,569.73 D D/(1+r)^3 3 17,800 $ 14,130.21 17,800 $ 10,562.80 E E/(1+r)^4 4 17,800 $ 13,083.53 17,800 $   8,876.30 F F/(1+r)^5 5 17,800 $ 12,114.38 17,800 $   7,459.08 G G/(1+r)^6 6 17,800 $ 11,217.02 17,800 $   6,268.13 H H/(1+r)^7 7 17,800 $ 10,386.13 17,800 $   5,267.34 I I/(1+r)^8 8 17,800 $   9,616.79 17,800 $   4,426.34 Sum of above PVs of cash flow NPV (needs to be >=0 to be feasible NPV(A) 18290.1732 NPV(B) -13612.2912 r if npv = 0 IRR (needs to be >= MARR to be feasible) IRR(A)= 13.49% IRR(B)= 13.49% .= Indifferent discount rate of accepting or rejecting

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