The Following Table Applies to Questions 20 through Question 27. Project R and S are m utually exclusive projects, Project R and S and their cost of capital (or discount rate) is 11%. What is the NPV for project R? Year Project R Project S 0 -$100,000 -$200,000 1 40,000 200,000 2 40,000 50,000 3 40,000 40,000 4 40,000 30,000 5 40,000 10,000 $47,835.88 $75,705.40 $27,869.52 $100,000
Project | ||||||
Discount rate | 11.000% | |||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow stream | -100000 | 40000 | 40000 | 40000 | 40000 | 40000 |
Discounting factor | 1.000 | 1.110 | 1.232 | 1.368 | 1.518 | 1.685 |
Discounted cash flows project | -100000.000 | 36036.036 | 32464.897 | 29247.655 | 26349.239 | 23738.053 |
NPV = Sum of discounted cash flows | ||||||
NPV Project = | 47835.88 | |||||
Where | ||||||
Discounting factor = | (1 + discount rate)^(Corresponding period in years) | |||||
Discounted Cashflow= | Cash flow stream/discounting factor |
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