A project has the following cash flows Year Cash Flow $16,500 7,200 8,500 7,000

Question

A project has the following cash flows Year Cash Flow $16,500 7,200 8,500 7,000 2 What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) NPV What is the NPV at a discount rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV What is the NPV at a discount rate of 21 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV What is the NPV at a discount rate of 29 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

Explanation / Answer

NPV of Project = Present Value of Cash Inflow - Present Value of cash Outflow

At zero Percent,

NPV =

= $ 7,200 * 1/(1.0) ^ 1 + $ 8,500 * 1/(1.0) ^ 2 + $ 7,000 * 1/(1.0) ^ 3 - $ 16,500

= $ 6,200

At 11 Percent,

NPV =

= $ 7,200 * 1/(1.11) ^ 1 + $ 8,500 * 1/(1.11) ^ 2 + $ 7,000 * 1/(1.11) ^ 3 - $ 16,500

= $ 2,003.62

At 21 Percent,

NPV =

= $ 7,200 * 1/(1.21) ^ 1 + $ 8,500 * 1/(1.21) ^ 2 + $ 7,000 * 1/(1.21) ^ 3 - $ 16,500

= - $ 792.65

At 29 Percent,

NPV =

= $ 7,200 * 1/(1.29) ^ 1 + $ 8,500 * 1/(1.29) ^ 2 + $ 7,000 * 1/(1.29) ^ 3 - $ 16,500

= - $ 2,549.90

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