Question

For the given cash flows, suppose the firm uses the NPV decision rule.
  

Year	Cash Flow
0	–$	153,000
1		63,000
2		76,000
3		60,000

At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
NPV            $

At a required return of 21 percent, what is the NPV of the project? (A negative answer 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            $

Answer 1

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

At 9%:

Present value of inflows=63000/1.09+76000/1.09^2+60000/1.09^3

=$168096.85

NPV=Present value of inflows-Present value of outflows

=$168096.85-$153000

=$15096.85(Approx).

At 21%:

Present value of inflows=63000/1.21+76000/1.21^2+60000/1.21^3

=$137843.57

NPV=Present value of inflows-Present value of outflows

  =$137843.57-$153000

=$(15156.43)(NEGATIVE)Approx).