Question
Compute the NPV statistic for Project U if the appropriate cost of capital is 10 percent....
Compute the NPV statistic for Project U if the appropriate cost of capital is 10 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)
| Project U | ||||||
| Time: | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flow: | –$1,600 | $590 | $2,080 | –$640 | $540 | –$220 |
NPV=
Should the project be accepted or rejected?
Homework Answers
Answer #1
Solution:-
To Calculate NPV of the Project-
NPV = PV of cash Inflow - PV of cash Outflow
NPV = 
NPV = 
NPV = 590 * 0.909 + 2,080 * 0.826 - 640 * 0.751 + 540 * 0.683 - 220 * 621 - 1,600
NPV = 536.36 + 1,719.01 - 480.84 + 368.83 - 136.60 - 1,600
NPV = $406.76
Project is accepted when NPV of the Project is greater than or equal to zero. Hence, the Project is accepted.
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