NPV = PRESENT VALUE OF CASH INFLOWS - PRESENT VALUE OF CASH OUTFLOWS
1.
PRESENT VALUE OF CASH INFLOWS @12% = 12400* 1/1.12 + 15400* 1/1.122 + 11400* 1/1.123 = $31462.509
OR
PV OF CASH INFLOWS @12% = 1/1.12 *12400= M+ 1/1.122 *15400= M+ 1/1.123 *11400 =M+ =MRC =$31462.509 (USING CALCULATOR M+,MRC FUNCTION)
PRESENT VALUE OF CASH OUTFLOWS (given) = $ 28400
THEREFORE NPV = $31462.509 - $28400 = $3062.509 POSITIVE
YES the proposal shall be accepted ,if the required rate of return is 12%.
2.
PV OF CASH INFLOWS @24% = 1/1.24 *12400 =M+ 1/1.242 *15400 =M+ 1/1.243 *11400 =M+ =MRC = $25994.76 (USING CALCULATOR M+,MRC FUNCTION)
THEREFORE NPV = $25994.76 - $28400 = -VE $2405.24 (NEGATIVE NPV)
NO the proposal shall not be accepted if the required rate of return is 24%.
Chapters 12, 13,9) Saved A firm evaluates all of its projects by applying the NPV decision...
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