Question

A project that provides annual cash flows of $2,620 for eight years costs $9,430 today.

a.	At a required return of 8 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	At a required return of 24 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
c.	At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Solution :

a. At a required return of 8 percent, the NPV of the project = $ 5,626.19

b. At a required return of 24 percent, the NPV of the project = - $ 466.40

c. The discount rate at which one would be indifferent between accepting the project and rejecting is the Internal Rate of return.

The Internal Rate of return (IRR) of the project = 22.19 %

Please find the attached screenshots of the excel sheet containing the detailed calculation for the solution.