A project has the following cash flows: YearCash Flow -$15,400 7,300 9,100 5,900

Question

A project has the following cash flows: YearCash Flow -$15,400 7,300 9,100 5,900 0 2 3 a. What is the NPV at a discount rate of zero percent? (Do not round intermediate b. What is the NPV at a discount rate of 10 percent? (Do not round intermediate c. What is the NPV at a discount rate of 20 percent? (Do not round intermediate d. What is the NPV at a discount rate of 30 percent? (A negative answer should be calculations and round your answer to the nearest whole number, e.g., 32.) calculations and round your answer to 2 decimal places, e.g., 32.16.) calculations and round your answer to 2 decimal places, e.g., 32.16.) indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.) a. NPV b. NPV C. NPV d. NPV

Explanation / Answer

NPV = Present Value of Cash inflows - Present Value of cash Outflows

a. NPV = [ $ 7300 * 1/(1.0) ^ 1 + $ 9100 * 1/(1.0) ^ 2 + 5900 * 1/(1.0) ^ 3 ] - $ 15,400

= $ 6,900

b.

NPV = [ $ 7300 * 1/(1.10) ^ 1 + $ 9100 * 1/(1.10) ^ 2 + 5900 * 1/(1.10) ^ 3 ] - $ 15,400

= $ 3,189.78

c.

NPV = [ $ 7300 * 1/(1.20) ^ 1 + $ 9100 * 1/(1.20) ^ 2 + 5900 * 1/(1.20) ^ 3 ] - $ 15,400

= $ 417.13

d.

NPV = [ $ 7300 * 1/(1.30) ^ 1 + $ 9100 * 1/(1.30) ^ 2 + 5900 * 1/(1.30) ^ 3 ] - $ 15,400

=- $ 1,714.52

Hence the correct answer is

a. NPV $ 6,900 b. NPV $ 3,189.78 c. NPV $ 417.13 d. NPV - $ 1,714.52

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