Question

For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 $ 149,000 O 1 67,000 72,000 N 56,000 w a. At a required return of 8 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. At a required return of 21 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV b. NPV

Answer 1

A) Year ONM PVF @ 8% Cash Flow 1.00000 $149,000 0.92593 $67,000 0.85734 $72,000 0.79383 $56,000 Net Present Value (NPV) Present Value $149,000.00 [1.00000 x $149000] $62,037.04 [0.92593 x $67000] $61,728.40 [0.85734 x $72000] $44,454.61 [0.79383 x $56000] $19,220.04 [Sum of present value from year-o thru year-3] B) Year PVF @ 21% Cash Flow 1.00000 $149,000 0.82645 $67,000 0.68301 $72,000 0.56447 $56,000 Net Present Value (NPV) Present Value $149,000.00 [1.00000 x-$149000] $55,371.90 (0.82645 x $67000) $49,176.97 [0.68301 x $72000] $31,610.54 (0.56447 x $56000] $12,840.59 [Sum of present value from year-O thru year-3] 2 3 NOTE: Present Value Factor (PVF) @ 8% = 1/(1+8%)*; 1/(1+8%)*; 1/(1+8%)*; Present Value Factor (PVF) @ 21% = 1/(1+21%)*; 1/(1+21%)*; 1/(1+21%)?