Question

Homework: Chapter 9 Homework (Copy) 4 of 9 (5 complete) Score: 0 of 2 pts P9-7 (similar to) Net present value. Quark Industries has a project with the following projected cash flows: a. Using a discount rate of 9% 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 16%? c. Should the company accept or reject it using a discount rate of 19%? a. Using a discount rate of 9%, 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 Initial cost: $270,000 Cash flow year one: $24,000 Cash flow year two: $78,000 Cash flow year three: $145,000 Cash flow year four: $145,000

Answer 1

DATE PAGE as Calculation of NPv If Discount Rate is g..) @ Initial Cast : $ 270,000 6) Annual Cashflare's pv = Cantiflar year Cashflaws Present Salue @ 9%. (1+ Biscount Rate) 92222 (in $) 24.000 (14.09) 24.000 78.000 145.000 145.000 22,018 65,651 111967 102, 721 ( 78.000,2) (14.0921 3 24.5.000 17.097 7145.000) ( (1+.og)" Por of Annual Cosbiflow 5= 302,357 NPV = Prof Annual - Initial Cashflow's Cost 270,000 302.357 - $ 32,357 So NPV Project is Positive should loe Accepted

PAGE c) 7 @ Calculation of NPV ( If Discount Rate is 19.7.) Initial Cost = $ 270.000 6 Annual Cashflaw's Pv = Cashflow's year (1+ Discourt Rate ) Year Cashflow's present Value @ 19.%. (ind) 24,000 24.000 (1+:19)'2 78,000 Tit. 19) 145.0003) 11.19% 2 20,168 55,081 86045 72.307 78,000 145.000 145.000 1145.000 g - (17:19) = $ 233.601 Pri af Snorwal Coshlaws's - $ 233.601 NPV = Prof Annual - Initial Cashflows Cost 1 233,601 - 270,000 - 36.399 So NPV is Negative Project should be Rejected