A project that provides annual cash flows of $2,200 for nine years costs $9,100

Question

A project that provides annual cash flows of $2,200 for nine years costs $9,100 today.

At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

At a required return of 25 percent, what is the NPV of the project? (Do not round intermediate calculations. A negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

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 percentage rounded to 2 decimal places (e.g., 32.16).)

At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

1)

NPV = -9100 + 2200 * [1- (1+9%)^-9]/9% = 4089.54

2)

NPV = -9100 + 2200 * [1- (1+25%)^-9]/25% = -1481.12

3)

NPV = -9100 + 2200 * [1- (1+R%)^-9]/R% = 0

=> R = 19.20%

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