A firm evaluates all of its projects by using the NPV decision rule. At a requir

Question

A firm evaluates all of its projects by using the NPV decision rule. At a required return of 8 percent, the NPV for the following project is $ and the firm should accept  the project. At a required return of 27 percent, the NPV is $ and the firm should reject the project. (Do not include the dollar signs ($). Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

Year Cash Flow   0 ?$30,000         1 20,000         2 14,000         3 9,000      

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

NPV = -30000 + 20000/(1+.08)^1 + 14000/(1+.08)^2 + 9000/(1+.08)^3 = 7665.75

Part B:

NPV = -30000 + 20000/(1+.27)^1 + 14000/(1+.27)^2 + 9000/(1+.27)^3 = -1178.24

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.