Question

10.00 points A project has the following cash flows: Year 0 1 Cash Flow -$16,800 7,500 8,800 7,300 2 3 What is the NPV at a discount rate of zero percent? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) NPV $ What is the NPV at a discount rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ What is the NPV at a discount rate of 21 percent? (Negative amount 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 $ What is the NPV at a discount rate of 29 percent? (Negative amount 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

Answer 1

At discount rate = 11% Initial cost= Year 1 16800.00 Cash Inflows Present value factor @ 11% Present value of cash inflows 7500.00 0.90090 6756.76 8800.00 0.81162 7142.28 7300.00 0.73119 5337.70 Total 19236.73 3 NPV 1 Answer: 2. Calculation of NPV 3 Formula will will use here 4. NPV Present value of Cash inflows - Initial cost 5 At discount rate=0 6 Initial cost = 16800.00 7 Year Cash inflows Present value factor @ 0% Present value of cash inflows 8 1 7500.00 1.00000 7500.00 2 8800.00 1.00000 8800.00 10 3 7300.00 1.00000 7300.00 11 Total 23600.00 12 13 NPV 14 Present vallue of cash inflows 23600.00 15 Less: Initial cost 16800.00 16 NPV 6800.00 17 18 I discount rate = 21% 19 Initial cost = 16800.00 20 Year Cash Inflows Present value factor @ 21% Present value of cash inflows 21 7500.00 0.82645 6198.35 22 2 8800.00 0.68301 6010.52 3 7300.00 0.56447 4120.66 24 Total 16329.53 25 26 NPV 27 Present vallue of cash inflows 16329.53 28 Less: Initial cost 16800.00 29 NPV -470.47 Present vallue of cash inflows Less: Initial cost NPV 19236.73 16800.00 2436,73 At discount rate = 29% Initial cost = Year 1 16800.00 Cash Inflows Present value factor @ 29% Present value of cash inflows 7500.00 0.77519 5813.95 8800.00 0.60093 5288.14 7300.00 0.46583 3400.59 Total 14502.68 2 3 23 NPV Present vallue of cash inflows Less: Initial cost NPV 14502.68 16800.00 -2297.32 30 31