A project that provides annual cash flows of $28,500 for nine years costs $138,0

Question

A project that provides annual cash flows of $28,500 for nine years costs $138,000 today. If the required return is 8 percent, the NPV for the project is $ and you would the project. If the required return is 20 percent, the NPV is $ and you would the project. At a discount rate of percent, you would be indifferent between accepting the project and rejecting it. (Do not include the dollar & percent signs ($ & %). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

NPV at 8%:

DF at 8% for 9 Years: 6.24689

PV at 8% = 28,500 x 6.24689 = $178,036.365

NPV = PV of Inflow - Outflow

NPV at 8% = 178,036.365 - 138,000 = $40,036.365

NPV at 20%:

DF at 20% for 9 Years: 4.031

PV at 20% = 28,500 x 4.031 = $114,883.50

NPV = PV of Inflow - Outflow

NPV = 114,883.50 - 138,000 = -$23,116.50

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