Year t=0 t=1 t=2 t=3 t=4 ??? $7,500 $12,500 $15,000 $17,500 The Payback Period of this...

Year t=0 t=1 t=2 t=3 t=4

??? $7,500 $12,500 $15,000 $17,500

The Payback Period of this project is 2.4 years. The appropriate discount rate is 13%. Find the Net Present Value of the project. (Note that the cash flow for t=0 is not provided to you – that is, you must first solve for it).

This will be a negative value

Solutions

Expert Solution

Ans NPV = $ 11555.33

Year	Project Cash Flows (i)	DF@ 13% (ii)	DF@ 13% (ii)	PV of Project B ( (i) * (ii) )
0	-26000	1	1	(26,000.00)
1	7500	1 / (1 + 13%)^1	0.885	6,637.17
2	12500	1 / (1 + 13%)^2	0.783	9,789.33
3	15000	1 / (1 + 13%)^3	0.693	10,395.75
4	17500	1 / (1 + 13%)^4	0.613	10,733.08
		NPV		11,555.33

	Cash flow for t = 0 = 2.4 =	cash flow of year 1 + year 2 + 0.4 of year 3
		7500 + 12500 + 0.4* 15000
		26000

jeff jeffy answered 10 months ago

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