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

ANSWER =A CALCULATION OF NPV WITH INTEREST RATE @ 12% Years Cash Flow PVF @ 12% Present Value 0 $               -2,60,000                     1.0000 $          -2,60,000.00 1 $                     23,000                     0.8929 $                20,535.71 2 $                     71,000                     0.7972 $                56,600.77 3 $                 1,50,000                     0.7118 $            1,06,767.04 4 $                 1,50,000                     0.6355 $                95,327.71 TOTAL PV = $                19,231.23 Answer A = The Project Should be accepted because the NPV is positive ANSWER =B CALCULATION OF NPV WITH INTEREST RATE @ 17% Years Cash Flow PVF @ 17% Present Value 0 $               -2,60,000                     1.0000 $          -2,60,000.00 1 $                     23,000                     0.8547 $                19,658.12 2 $                     71,000                     0.7305 $                51,866.46 3 $                 1,50,000                     0.6244 $                93,655.58 4 $                 1,50,000                     0.5337 $                80,047.51 TOTAL PV = $              -14,772.33 Answer B = The Project Should not be accepted because NPV is negative ANSWER =C CALCULATION OF NPV WITH INTEREST RATE @ 18% Years Cash Flow PVF @ 18% Present Value 0 $               -2,60,000                     1.0000 $          -2,60,000.00 1 $                     23,000                     0.8475 $                19,491.53 2 $                     71,000                     0.7182 $                50,991.09 3 $                 1,50,000                     0.6086 $                91,294.63 4 $                 1,50,000                     0.5158 $                77,368.33 TOTAL PV = $              -20,854.42 Answer C = The Project Should not be accepted because NPV is negative

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.