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 10 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 26 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.)

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

Explanation / Answer

1) Present value = (PVF@10%,1 *CF1 ) +(PVF@10%,2 *CF2 )+(PVF@10%,3 *CF3)

                             = (.90909 * 11000) +(.82645 * 14000 ) +(.75131 * 10000)

                             = 9999.99+ 11570.3+ 7513.1

                            = 29083.39

NPV =Present value -Initial investment

    = 29083.39 - 27000

    = 2083.39

2)Yes ,as NPV is positive

3)Present value = (.79365*11000 ) +(.62988 * 14000 ) +(.49991* 10000)

                        = 8730.15+8818.32+ 4999.1

                        = 22547.57

NPV = 22547.57 -27000

       = - 4452.43

4)No.as NPV is negative

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