Question
In: Finance
A firm evaluates all of its projects by applying the NPV decision rule. A project under...
|
A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: |
| Year | Cash Flow | ||
| 0 | –$ | 27,400 | |
| 1 | 11,400 | ||
| 2 | 14,400 | ||
| 3 | 10,400 | ||
|
What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
| At a required return of 12 percent, should the firm accept this project? | ||||
|
|
What is the NPV for the project if the required return is 24 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV | $ |
| At a required return of 24 percent, should the firm accept this project? | ||||
|
Solutions
Expert Solution
| Statement showing Cash flows | ||||
| Particulars | Time | PVf 12% | Amount | PV |
| Cash Outflows | - | 1.00 | (27,400.00) | (27,400.00) |
| PV of Cash outflows = PVCO | (27,400.00) | |||
| Cash inflows | 1.00 | 0.8929 | 11,400.00 | 10,178.57 |
| Cash inflows | 2.00 | 0.7972 | 14,400.00 | 11,479.59 |
| Cash inflows | 3.00 | 0.7118 | 10,400.00 | 7,402.51 |
| PV of Cash Inflows =PVCI | 29,060.68 | |||
| NPV= PVCI - PVCO | 1,660.68 | |||
| Yes firm should accept project as NPV is positive | ||||
| Statement showing Cash flows | ||||
| Particulars | Time | PVf 24% | Amount | PV |
| Cash Outflows | - | 1.00 | (27,400.00) | (27,400.00) |
| PV of Cash outflows = PVCO | (27,400.00) | |||
| Cash inflows | 1.00 | 0.8065 | 11,400.00 | 9,193.55 |
| Cash inflows | 2.00 | 0.6504 | 14,400.00 | 9,365.24 |
| Cash inflows | 3.00 | 0.5245 | 10,400.00 | 5,454.67 |
| PV of Cash Inflows =PVCI | 24,013.46 | |||
| NPV= PVCI - PVCO | (3,386.54) | |||
| No firm should accept project as NPV is negative | ||||
jeff jeffy answered 3 years agoRelated Solutions
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A firm evaluates all of its projects by applying the NPV decision rule. A project under...
A firm evaluates all of its projects by applying the NPV
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0
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27,300
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At a required return of 10 percent, should the firm accept this
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What is...
1. A firm evaluates all of its projects by applying the NPV decision rule. A project...
1.
A firm evaluates all of its projects by applying the NPV
decision rule. A project under consideration has the following cash
flows:
Year
Cash Flow
0
$
-34,000
1
15,000
2
17,000
3
13,000
If the NPV = $1.27, should the firm accept this project?
A) Yes
B) No
2.
If the NPV of the above project is as stated above, how much
value does it add to the firm, compared to investing in an
Opportunity Cost Investment project?...
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%
２．Should the firm accept the project?
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Yes
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Year
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0
–$
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1
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2
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3
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1.If the required return is 15 percent, what is the IRR for this
project? (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
IRR
%
2. Should the firm accept the project?
Yes
No
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