a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=64,000/1.12+75,000/1.12^2+59,000/1.12^3
=$158,927.43
NPV=Present value of inflows-Present value of outflows
=$158,927.43-$148,000
=$10,927.43(Approx).
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=64,000/1.21+75,000/1.21^2+59,000/1.21^3
$137,422.53
NPV=Present value of inflows-Present value of outflows
=$137,422.53-$148,000
=$(10577.47)(Approx).(Negative).
For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 $ 148,000 WN - 64,000 75,00...
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