Question

A project that provides annual cash flows of $18,100 for eight years costs $87,000 today. What...

A project that provides annual cash flows of $18,100 for eight years costs $87,000 today. What is the NPV for the project if the required return is 7 percent? What is the NPV for the project if the required return is 19 percent? At what discount rate would you be indifferent between accepting the project and rejecting it?

Homework Answers

Answer #1

NPV is the net present value of all the cash flows.

Formulas Used:

NPV for the project if the required return is 7 percent = $21,080.50

NPV for the project if the required return is 19 percent = -$15,425.98

Discount rate at which you would be indifferent between accepting the project and rejecting it = 12.95%

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