A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: 
Year  Cash Flow  
0  –$  27,500  
1  11,500  
2  14,500  
3  10,500  
What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 
NPV $
At a required return of 11 percent, should the firm accept this project?  

a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=11500/1.11+14500/1.11^2+10500/1.11^3
=$29806.40
NPV=Present value of inflowsPresent value of outflows
=$29806.40$27500
=$2306.4(Approx).
Hence since NPV is positive;project must be accepted.
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=11500/1.25+14500/1.25^2+10500/1.25^3
=$23856
NPV=Present value of inflowsPresent value of outflows
=$23856$27500
=$(3644)(Negative).
Hence since NPV is negative;project must be rejected.
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