Question

A project has the following out-flows and in-flows: out-flows: 12,000 at t = 0, 6,000 at t = 3, 9,000 at t = 6 and 12,000 at t = 9 in-flows: 3,000 at t = 2 through t = 14 plus 12,000 at t = 15. If your desired internal rate of return was 8%, would you accept this project? Answer is NP V (0.08) = −2699.67 < 0 so reject project. How do i get that answer?

Answer 1

Calculation of net present value:
Time	Cashflow	PVF @8%	PV
0	-12000	1.00	-12,000.00
1	0	0.9259	-
2	3000	0.8573	2,572.02
3	-3000	0.7938	-2,381.50
4	3000	0.7350	2,205.09
5	3000	0.6806	2,041.75
6	-6000	0.6302	-3,781.02
7	3000	0.5835	1,750.47
8	3000	0.5403	1,620.81
9	-9000	0.5002	-4,502.24
10	3000	0.4632	1,389.58
11	3000	0.4289	1,286.65
12	3000	0.3971	1,191.34
13	3000	0.3677	1,103.09
14	3000	0.3405	1,021.38
15	12000	0.3152	3,782.90
NPV			-2,699.67
NPV is -2699.67
Since NPV is negative project should be rejected