Question

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Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative...

Compute the NPV for Project M if the appropriate cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project M
Time: 0 1 2 3 4 5
Cash flow: –$1,200 $390 $520 $560 $640 $140

NPV?

Should it be accepted or rejected

Solutions

Expert Solution

Year Cash flow Discount factor Present value
a b c=1.09^-a d=b*c
0 $       -1,200      1.0000 $ -1,200.00
1 $            390      0.9174 $      357.80
2 $            520      0.8417 $      437.67
3 $            560      0.7722 $      432.42
4 $            640      0.7084 $      453.39
5 $            140      0.6499 $         90.99
NPV $      572.28
The project should be accepted because it has positive NPV.

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