Question

Compute the NPV statistic for Project U if the appropriate cost of capital is 9 percent....

Compute the NPV statistic for Project U if the appropriate cost of capital is 9 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: −$1,200 $430 $1,680 −$560 $380 −$140

NPV?

Should the project be accepted or rejected?

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Answer #1
Time 0 1 2 3 4 5
Cash Flow -$1200 $430 $1680 -$560 $380 -$140

Cost of capital = 9%

NPV = -$1200 + $430/1.09 + $1680/1.092 -$560/1.093 + $380/1.094  -$140/1.095

= -$1200 + $394.50 + $ 1414.02 - $432.42 + $ 269.20 - $90.99

= $ 354.31

Since NPV > 0 , project should be accepted.

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