In: Finance
A magazine publisher wants to launch a new magazine geared to college students. The project's initial investment is $65. The project's cash flows that come in at the end of each year are $23 for 5 consecutive years beginning one year from today. What is the project's NPV if the required rate of return is 15%?
$_____
Place your answer in dollars and cents without the use of a dollar sign or comma. If applicable, a negative answer should have a "minus" sign in front of the number.
Work your analysis out to at least 4 decimal places of accuracy.
Based upon the NPV decision rule, should the company accept or reject the project?
Answer #2:(Yes or No) Place your aswer as the word "yes" or the word "no".
Solution :
The Project's NPV if the required rate of return is 15% is = $ 12.0996 ( at 4 decimal places of accuracy )
Answer in dollars and cents = 12 Dollars and 10 cents
As per the NPV Rule
1. If the NPV of the project is positive i.e., greater than zero, the project should be accepted.
2. If the NPV of the project is negative i.e., less than zero, the project should not be accepted.
Since the NPV of the project is = $ 12.0996 which is positive, the project should be accepted.
Based upon the NPV decision rule, the company should accept the project.
The Answer is = YES
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.