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

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).