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Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this...

Monroe, Inc., is evaluating a project. The company uses a 13.8 percent discount rate for this project. Cost and cash flows are shown in the table. What is the NPV of the project? Year Project 0 ($11,368,000) 1 $ 2,142,590 2 $ 3,787,552 3 $ 3,250,650 4 $ 4,115,899 5 $ 4,556,424 Round to two decimal places.

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Answer #1

Given

Discount rate = 13.8% (0.138)

Cash flows given in the table below

Year

Project cash flows

0

($11,368,000)

1

$ 2,142,590

2

$ 3,787,552

3

$ 3,250,650

4

$ 4,115,899

5

$ 4,556,424

We have to calculate the NPW

NPW = – $11,368,000 + $ 2,142,590 (1+0.138) -1 + $ 3,787,552 (1+0.138) -2 +

   $ 3,250,650 (1+0.138) -3 + $ 4,115,899 (1+0.138) -4 + $ 4,556,424 (1+0.138) -5

NPW = $486,555.14

The NPV of the project is $486,555.14

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