Question

Net present value. Lepton Industries has a project with the following projected cash flows: a. Using a discount rate of 10% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 17%? c. Should the company accept or reject it using a discount rate of 20%? a. Using a discount rate of 10%, this project should be V. (Select from the drop-down menu.) 0 Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Initial cost: $464,000 Cash flow year one: $124,000 Cash flow year two: $240,000 Cash flow year three: $191,000 Cash flow year four: $124,000 Print Done

Answer 1

Tot 2.4 2.9090 2.8264 - MJ 3 3 .7513 D - e using a discount sale a 10% :- year I Cashflow ſ Discount faclá@ 106 | Discomted Cashflows $ (464ovo) $(464000) $ 124,000 4112716 $ 240000 La $198,336 1 191000 $143,4983 124,000 1 = .6830 $ 84692 (1.1) 4 75243.2 - Project should be accepted since wpy is . Posilwe. (b&o years Cashflono of@ 14% DF@ 207 | DCF @ 17% ACF@20% $124,000 = 8547 .8833 $105,982.8 $103329.2 $ 240,000 1 17322 •+305 .6944 $ 16,320 $1666706 $ 191,000 U-1933-56243 .5787 $ 119,241.3 $110531.7 $ 124,000 $ 66166.4 $5979268 anitail / cash flow (469000) (464,000) Npv = > 241011 "-23690.3 Company should accept the project in ease b @17% since Apy is positive Company should reject the project in case c @ 20% since alpy is negative MJ (1.17)4 * • 5336/

conclusion :Company should accept the project @10% and 17% discount rates as NPV is positive. and company should rject the project @20% discount rate as NPV is negative