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 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

  

  

What is the NPV for the project if the required return is 24 percent?(Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

  

Year Cash Flow 0 –$ 28,100 1 12,100 2 15,100 3 11,100

Explanation / Answer

1)

2) accept project as NPV > 0

3)

4)reject project as NPV < 0

Discount rate =   12.000% Year 0 1 2 3 Cash flow stream -28100 12100 15100 11100 Discounting factor 1 1.12 1.2544 1.404928 Discounted cash flows project -28100 10803.57 12037.63 7900.761 Sum of discounted future cashflows = 2641.96 =NPV Discounting factor = (1 + Required rate)^(CORRESPONDING PERIOD IN YEARS) Discounted Cashflow= Cash flow stream/discounting factor

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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