Compute the NPV for Project K if the appropriate cost of capital is 7 percent. (Negative...

Compute the NPV for Project K if the appropriate cost of capital is 7 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 K
Time:	0	1	2	3	4	5
Cash flow:	−$11,600	$5,800	$6,800	$6,800	$5,800	−$14,600

Should the project be accepted or rejected?

rejected
accepted

Solutions

Expert Solution

NPV :
NPV = PV of Cash Inflows - PV of Cash Outflows
If NPV > 0 , Project can be accepted
NPV = 0 , Indifference point. Project can be accepted/ Rejected.
NPV < 0 , Project will be rejected.

Cash Flows for 5 Years
Year	CF	PVF @0.07	Disc CF
0	$ -11,600.00	1.0000	$ -11,600.00
1	$ 5,800.00	0.9346	$ 5,420.56
2	$ 6,800.00	0.8734	$ 5,939.38
3	$ 6,800.00	0.8163	$ 5,550.83
4	$ 5,800.00	0.7629	$ 4,424.79
5	$ -14,600.00	0.7130	$ -10,409.60
NPV	$ -674.04

As NPV is -ve, Reject the Project.

Pls do rate, if the answer is correct and comment, if any further assistance is required.

jeff jeffy answered 1 year ago

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