This Question: 1 pt 31 of 50 (14 complete) TI Net present value. Quark Industrie

Question

This Question: 1 pt 31 of 50 (14 complete) TI Net present value. Quark Industries has a project with the following projected cash flows: Initial cost: $260,000 Cash flow year one: $23,000 Cash flow year two: $71,000 Cash flow year three: $150,000 Cash flow year four: $150,000 a. Using a discount rate of 12% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 17%? Should the company accept or reject it using a discount rate of 18%? a. Using a discount rate of 12%, this project should be b. Using a discount rate of 17%, this project should be , this project should be 1. (Select from the drop-down menu.) | . (Select from the drop-down menu.) I. (Select from the drop-down menu.) c. Using a discount rate of 18%. Click to select your answer(s)

Explanation / Answer

a.Using a discount rate of 12% this project should be ACCPETED.

b.Using a discount rate of 17% this project should be REJECTED.

c.Using a discount rate of 18%, this project should be REJECTED.

NOTE:

a.the NPV when discount rate is 12%.

b.if 17% is the discount rate

C.iF 18% is the discount rate.

Year Cash flow Discounting factor @ 12%=(1/(1+rate)^time) Discounted cash flow1 0 260,000 1 (260,000) 1 23,000 (1/(1.12))=>0.89286 20,536 2 71,0000 (1/(1.12)^2)=>0.79719 59,596 3 150,000 (1/(1.12)^3)=>0.71178 106,767 4 150,000 (1/(1.12)^4)=>0.63552 95,328 NPV 22,227

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