Compute the NPV statistic for Project U if the appropriate cost of capital is 10 percent....

Question

Question

Compute the NPV statistic for Project U if the appropriate cost of capital is 10 percent. (Negative amount should be indicate

Answer 1

Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=710/1.1+2380/1.1^2+660/1.1^4

=3063.19

Present value of outflows=2400+700/1.1^3+280/1.1^5

=3099.78

NPV=Present value of inflows-Present value of outflows

=3063.19-3099.78

=-36.59(Negative)(Approx).

Hence since NPV is negative;project must be rejected.

Answer 2

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