Question

QUESTION 11

1. Assume that your investment decision for 2372-2374 is based on a net present value calculation. You will only go ahead with the investment if the Net Present Value calculation is positive. Your Net Operating Income over the next 25 years must be positive. The discount rate you will use is 24%. The purchase price is $4,500,000. You will sell the property at the end of year 25 for $6 million.

   After a detailed analysis you project the following Net Operating Income for the property.

   time	Net Operating Income
   0
   1	$25,000
   2	$25,000
   3	$25,000
   4	$25,000
   5	$25,000
   6	$25,000
   7	$25,000
   8	$25,000
   9	$25,000
   10	$25,000
   11	$25,000
   12	$25,000
   13	$25,000
   14	$25,000
   15	$25,000
   16	$25,000
   17	$25,000
   18	$25,000
   19	$25,000
   20	$25,000
   21	$25,000
   22	$25,000
   23	$25,000
   24	$25,000
   25	$25,000

   You should make this investment. The NPV is positive.

TRUE OR FALSE?

Answer 1

Here the NPV is negative. So the project is not recommended and no need to make investment in the project. Its false to make investment in the project.
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reference https://www.calculatestuff.com/financial/npv-calculator