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:

YEAR

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))

NPV= $ ??

At a required return of 11 percent, should the firm accept this project? (YES/NO?)

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))

NPV= $ ??

At a required return of 25 percent, should the firm accept this project? (YES/NO?)

YEAR

CASH FLOW 0 $-28,900.00 1 12,900.00 2 15,900.00 3 11,900.00

Explanation / Answer

A)NPV = 4327.53

B) yes,as NPV is positive

C) =NPV = -2311.2

D)No,as NPV is negative

year cash flow At 11% At 25% A Present value @ 11% (B) NPV (A*B) Present value @25% (C) NPV (A*C) 0 -28900 1 -28900 1 -28900 1 12900 .90090 11621.61 .8 10320 2 15900 .81162 12904.76 .64 10176 3 11900 .73119 8701.16 .512 6092.8 NPV 4327.53 -2311.2

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