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

Statement showing Cash flows Particulars Time PVf@10% Amount PV Cash Outflows                       -                        1.00                         (27,000.00)                         (27,000.00) PV of Cash outflows = PVCO                         (27,000.00) Cash inflows                   1.00                 0.9091                           11,000.00                           10,000.00 Cash inflows                   2.00                 0.8264                           14,000.00                           11,570.25 Cash inflows                   3.00                 0.7513                           10,000.00                              7,513.15 PV of Cash Inflows =PVCI                           29,083.40 NPV= PVCI - PVCO                              2,083.40 Yes Firm should accept project Statement showing Cash flows Particulars Time PVf@26% Amount PV Cash Outflows                       -                        1.00                         (27,000.00)                         (27,000.00) PV of Cash outflows = PVCO                         (27,000.00) Cash inflows                   1.00                 0.7937                           11,000.00                              8,730.16 Cash inflows                   2.00                 0.6299                           14,000.00                              8,818.34 Cash inflows                   3.00                 0.4999                           10,000.00                              4,999.06 PV of Cash Inflows =PVCI                           22,547.56 NPV= PVCI - PVCO                           (4,452.44) No Firm should not accept project

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