Question

A project has the following cash flows: Year Cash Flow 0 –$ 15,400 1 6,100 2...

A project has the following cash flows: Year Cash Flow 0 –$ 15,400 1 6,100 2 7,400 3 5,900 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 $ 4,000 What is the NPV at a discount rate of 8 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 1,276.06 What is the NPV at a discount rate of 16 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 $ 862 What is the NPV at a discount rate of 28 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 $ 3,304.43

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Answer #1

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

At 0%:

Present value of inflows=6100+7400+5900=$19400

NPV=Present value of inflows-Present value of outflows

=(19400-15400)=$4000

At 8%:

Present value of inflows=6100/1.08+7400/1.08^2+5900/1.08^3

=$16676.07

NPV=$16676.07-$15400

=$1276.07(Approx).

At 16%:

Present value of inflows=6100/1.16+7400/1.16^2+5900/1.16^3

=$14537.91

NPV =$14537.91-$15400

=$(862.09)(Negative)(Approx).

At 28%:

Present value of inflows=6100/1.28+7400/1.28^2+5900/1.28^3

=$12095.57

NPV  =$12095.57-$15400

=$(3304.43)(Approx)(Negative).

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