Question

instruction Fill in the blanks ete Do not use a thousand separator, use only two decimal places, Use parenthesis if the answer is negative Avoid blank spaces ut of Several projects were proposed with the following initial investments, expected revenues for the first, second, and third years respectively With target rate of return is 15% what are its NPVS? Which project/s would you consider? 17500.00 20000.00 25000.00 15% 15% 15% 13 12 1 NPV Investment 50000.00 Total NPV would consider/not consider this project Yes/No 25000.00 20000 00 17500.00 15% 15% 15% NPV Investment 50000.00 Total NPV would consider/not consider this project Yes/No CE offer letter.pdf Analou Tubio S A CH26 ppt Type here to search DELL

Answer 1

1. values given in the question.

first find the present value of each revenue where, r = targeted  rate of return   

PV = Revenue/ (1+r)ⁿ

Revenue Year(n) interest rate(r) PV (NPV)

25000 1 15% 25000/1.15 = 21739.13

20000 2 15% 20000/(1.15)² = 15122.87

17500 3 15% 17500/(1.15)³ = 11506.53

  

Total PV (NPV) = 21739.13 + 15122.87 + 11506.53

= 48368.53

Net present value = Total PV - initial investment

= 48368.53 - 50000

= - 1631.46

hence NPV is negative 1631.36 so I would not consider this project.

2.  

first find the present value of each revenue where, r = targeted  rate of return   

PV = Revenue/ (1+r)ⁿ

Revenue Year(n) interest rate(r) PV (NPV)

17500 1 15% 17500/1.15 = 15217.40

20000 2 15% 20000/(1.15)² = 15122.87

25000 3 15% 25000/(1.15)³ = 16437.90

  

Total PV (NPV) = 15217.4  + 15122.87 + 16437.90

= 46778.17

Net present value = Total PV - initial investment

= 46778.17 - 50000

= - 3221.83

hence NPV is negative 3221.83 so I would not consider this project.