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A firm evaluates all of its projects by using the NPV decision rule. Year Cash Flow...

A firm evaluates all of its projects by using the NPV decision rule. Year Cash Flow 0 –$28,000 1 21,000 2 14,000 3 9,000 a. At a required return of 24 percent, what is the NPV for this project? b. At a required return of 40 percent, what is the NPV for this project?

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Expert Solution

NPV = -Initial investment + Present value of cash flows

a. NPV = -$28,000 + $21,000/1.24 + $14,000/1.24^2 + $9,000/1.24^3 = $2,760.97

b. NPV = -$28,000 + $21,000/1.40 + $14,000/1.40^2 + $9,000/1.40^3 = -$2,577.26

jeff jeffy answered 2 years ago
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