Question

Billy Bob Baseballs is considering a project that has the following cash flow and cost of...

Billy Bob Baseballs is considering a project that has the following cash flow and cost of capital (r) data. What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected.

r:

12.00%

Year

0

1

2

3

Cash flows

−$1,000

$126

$126

$126

(Answer in $s to the nearest penny, xxx.xx, with no $ sign or comma needed, but use a minus sign - , if needed.)

0 0
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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=126[1-(1.12)^-3]/0.12

=126*2.401831268

=$302.63

NPV=Present value of inflows-Present value of outflows

=$302.63-$1000

=(697.37)(Approx)(Negative).

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