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

Question

Suppose your firm is considering investing in a project with the cash flows shown blow, that the required rate of return on projects of this risk class is 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 end 4.5 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 and round your answer to 2 decimal places.) NPV $ Should it be accepted or rejected? C) Accepted C Rejected

Explanation / Answer

NPV = -5100 + 1280/1.09 + 2480/1.09^2 + 1680/1.09^3 + 1680/1.09^4 + 1480/1.09^5 + 1680/1.09^6

NPV = $ 2612.73

Since NPV is positive the project should be accepted

Answer

1) NPV = $ 2612.73

2) Accepted

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