Question
In: Finance
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present value for the project shown in the following table and indicate whether it is acceptable
| Initial investment
(CF 0CF0) |
-$1149 |
|
| Year
(t) |
Cash inflows
(CF Subscript tCFt) in thousands |
|
|
1 |
$80 |
|
|
2 |
$130 |
|
|
3 |
$189 |
|
|
4 |
$256 |
|
|
5 |
$312 |
|
|
6 |
$376 |
|
|
7 |
$280 |
|
|
8 |
$102 |
|
|
9 |
$42 |
|
|
10 |
$20 |
|
Solutions
Expert Solution
Ans NPV = -$ 75.82
Since NPV is negative, the project must be rejected.
NPV = Present value of cash inflows - cash outflows.
| Year | Project Cash Flows (i) | DF@ 11% | DF@ 11% (ii) | PV of Project ( (i) * (ii) ) |
| 0 | -1149 | 1 | 1 | (1,149.00) |
| 1 | 80 | 1/((1+11%)^1) | 0.901 | 72.07 |
| 2 | 130 | 1/((1+11%)^2) | 0.812 | 105.51 |
| 3 | 189 | 1/((1+11%)^3) | 0.731 | 138.20 |
| 4 | 256 | 1/((1+11%)^4) | 0.659 | 168.64 |
| 5 | 312 | 1/((1+11%)^5) | 0.593 | 185.16 |
| 6 | 376 | 1/((1+11%)^6) | 0.535 | 201.02 |
| 7 | 280 | 1/((1+11%)^7) | 0.482 | 134.86 |
| 8 | 102 | 1/((1+11%)^8) | 0.434 | 44.26 |
| 9 | 42 | 1/((1+11%)^9) | 0.391 | 16.42 |
| 10 | 20 | 1/((1+11%)^10) | 0.352 | 7.04 |
| NPV | (75.82) |
jeff jeffy answered 1 year agoRelated Solutions
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present
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Initial investment
(CF 0CF0)
negative $−$1149
Year
(t)
Cash inflows
(CF Subscript tCFt)
in thousands
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