Question

A firm evaluates all of its projects by using the NPV decision rule.    Year                 Cash...

A firm evaluates all of its projects by using the NPV decision rule.

  

Year                 Cash Flow
0 –$28,000      
1 19,000      
2 13,000      
3 9,000      

  

a. At a required return of 14 percent, what is the NPV for this project?

  

b. At a required return of 39 percent, what is the NPV for this project?
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Answer #1
Requirement a
Year PV factor @ 14% Cash flows Present value of cash flows
0 1.000000 -28000 -28000.00
1 0.877193 19000 16666.67
2 0.769468 13000 10003.08
3 0.674972 9000 6074.75
NPV 4744.50
Requirement b
Year PV factor @ 39% Cash flows Present value of cash flows
0 1.000000 -28000 -28000.00
1 0.719424 19000 13669.06
2 0.517572 13000 6728.44
3 0.372354 9000 3351.19
NPV -4251.32
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