A firm evaluates all of its projects by applying the NPV decision rule. A projec

Question

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

  

  

What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

  

  

What is the NPV for the project if the required return is 25 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  

  

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

Explanation / Answer

Answer:

At a required return of 11 percent, the project should be accepted because NPV is positive.

At a required return of 25 percent, the project should not be accepted because NPV is negative.

Particulars Time P.V.F (11%) Amount ($) P.V ($) Cash outflow 0 1 -28600 -28600 Cash inflow 1 0.9009009 12600 11351.35 2 0.811622432 15600 12661.31 3 0.73119138 11600 8481.82 NPV 3894.481

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