A project that provides annual cash flows of $17,400 for ten years costs $80,000

Question

A project that provides annual cash flows of $17,400 for ten years costs $80,000 today. What is the NPV for the project if the required return is 9 percent? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) NPV $ At a required return of 9 percent, should the firm accept this project? Accept Reject What is the NPV for the project if the required return is 21 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.) NPV $ At a required return of 21 percent, should the firm accept this project? Accept Reject At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Discount rate %

Explanation / Answer

use npv formuale in excle to find it

=-80,000+NPV(9%,17400,17400,17400,17400,17400,17400,17400,17400,17400,17400)

=31,667.24

Yes they should accept the project since NPV is positive

if required return is 21% then NPV is

=-80,0000+NPV(21%,17400,17400,17400,17400,17400,17400,17400,17400,17400,17400)

=$-9,459.04

They should reject the project since NPV is negative

It is indifference and it can be found using IRR function in excel which will tell rpesent value of cash inflows = cash outlfow

=irr(-80000,17400,17400,17400,17400,17400,17400,17400,17400,17400,17400)

=17.36%

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