A project that provides annual cash flows of $3,100 for nine years costs $10,400

Question

A project that provides annual cash flows of $3,100 for nine years costs $10,400 today.

At a required return of 12 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
NPV            $

At a required return of 28 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
NPV            $
  
At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Discount rate             %

Explanation / Answer

1) NPV=-10400+(3100/0.12)*(1-(1+0.12)^-9)=6117.5

2) at 28% NPV=-10400+(3100/0.28)*(1-(1+0.28)^-9)=-528.94

3) when 10400=(3100/r)*(1-(1+r)^-9)

atdiscount rate r=26% the project will indifferent

Present Value of annuity= (P/r)(1-(1+r)^-n) where P=periodic payment

r=discount rate

n=periods

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