O | ezto mheducation.com/hm.tpx FINANC Chapter 18 Question 6 (of 9 6. value 10.0

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O | ezto mheducation.com/hm.tpx FINANC Chapter 18 Question 6 (of 9 6. value 10.00 points Problem 8-6 Calculating NPV [LO 4 For the given cash flows, suppose the firm uses the NIPV decision rule $ 151,000 65,000 74,000 58,000 At a required refurn of 11 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g, 32.16) S10027.40 calculations and rou negative answer should be indicated by a minus sign. Do not round intermediate At a required refum of 22 percent, what is the NPV of the project? (A NPV S -16062 63 References Section 8.1 Not Prosent Value Difficulity 1 Basic Worksheet Problem 8-6 Calculating NPV [LO 4]Leaming Objective: 08-04 Evaluate proposed OI Type here to search

Explanation / Answer

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

At 11%:

Present value of inflows=65000/1.11+74000/1.11^2+58000/1.11^3

=$161027.72(Approx)

NPV=Present value of inflows-Present value of outflows

=(161027.72-151000)

=$10027.72(Approx).

b.

Present value of inflows=65000/1.22+74000/1.22^2+58000/1.22^3

=$134937.51(Approx)

NPV=Present value of inflows-Present value of outflows

=($134937.51-151000)

=-$16062.49(Approx).(Negative figure).

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