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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?
Accepted
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 3 years ago
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