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A firm evaluates all of its projects by using the NPV decision rule. Year WNLO Cash Flow -$30,000 21,000 15,000 6,000 a. At a

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Answer #1

a)

NPV = Present value of cash inflows - present value of cash outflows

NPV = -30000 + 21000 / (1 + 0.1)1 + 15000 / (1 + 0.1)2 + 6000 / (1 + 0.1)3

NPV = $5,995.49

b)

NPV = Present value of cash inflows - present value of cash outflows

NPV = -30000 + 21000 / (1 + 0.36)1 + 15000 / (1 + 0.36)2 + 6000 / (1 + 0.36)3

NPV = -4,063.71

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