QUESTION 6 Tuttle Enterprises is considering a project that has the following ca

Question

QUESTION 6 Tuttle Enterprises is considering a project that has the following cash flow and WACC data What is the projects NPV? Note that if a projects projected NPV is negative, it should be rejected. WACC: 11.50% Cash flows O a.084.03 O b. 064.70 O C. 059.49 O d. 082.54 O e.074.36 $1,000 S350 $350 $350 $350 QUESTION 7 Suppose you invest $2500 in a savings account that earns 12.5% per year. How much will be in the account in 7 years? O $5,701.74 O $1,096.16 O $25,613.95 O $11,230.75 None of these

Explanation / Answer

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

=350/1.115+350/1.115^2+350/1.115^3+350/1.115^4

=$1074.36

NPV=Present value of inflows-Present value of outflows

=(1074.36-1000)

$74.36(Approx)

2.

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence

A=2500(1.125)^7

=$5701.74(Approx)

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