Question
In: Finance
Compute the NPV for Project M if the appropriate cost of capital is 7 percent. (Negative...
|
Compute the NPV for Project M 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 M | ||||||
| Time: | 0 | 1 | 2 | 3 | 4 | 5 |
| Cash flow | –$2,000 | $550 | $680 | $720 | $800 | $300 |
| NPV | $ |
| Should the project be accepted or rejected? | ||||
|
Solutions
Expert Solution
| Solution: | ||||
| NPV | $519.90 | |||
| Project should be : | Accepted | |||
| Working Notes: | ||||
| a | b | c= a x b | ||
| Year | Cash Flow | PVF @ 7% | Present value | |
| 0 | -2,000 | 1 | -2,000.00 | d |
| 1 | 550 | 0.93457944 | 514.01869 | e |
| 2 | 680 | 0.87343873 | 593.93834 | f |
| 3 | 720 | 0.81629788 | 587.73447 | g |
| 4 | 800 | 0.76289521 | 610.31617 | h |
| 5 | 300 | 0.71298618 | 213.89585 | i |
| NPV | 519.90 | j= NPV = d+e+f+g+h+i | ||
| The project M should be accepted as NPV is positive $519.90 | ||||
| Notes: PVF is calculated @ 7% = 1/(1+0.07)^n where n is the year of cash flows for which PVF is calculated. | ||||
| Please feel free to ask if anything about above solution in comment section of the question. | ||||
jeff jeffy answered 1 year agoRelated Solutions
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