Question

You are considering a project that has an initial investment of $8,300 with an initial time period of 3 years. The cash flows would be provided semiannually, already adjusted for taxes, as shown in the table below. At the end of the project, you require a 12% annual return, which is 6% semiannually. (Your answer should be to two decimal places.)

Year
1	Jan - June	$1,200
1	Jul - Dec	$1,500
2	Jan - June	$1,100
2	Jul - Dec	$1,000
3	Jan - June	$800
3	Jul - Dec	$1,300

Year	Months	Cash Flows
3	Jul - Dec	$1,200

Answer 1

The NPV of the project can be calculated as the sum of the present value of all cash flows

NPV = -8300 + 1200/1.06+1500/1.06^2+1100/1.06^3+ 1000/1.06^4+800/1.06^5+1300/1.06^6+1200/1.06^6

=-8300+1132.08+1334.99+923.58+792.09+597.81+1762.40

=-8300+6542.95

= - $ 1757.05

As the NPV is negative one should not take the project.

No money should be invested in the project as it is providing less than 12% as the rate of return. In fact , it is providing negative rate of return because the sum of nominal values of all the cashflows is $8100 which is less than the investment requirement.