Consider the following project balances for a typical investment project with th
ID: 2652497 • Letter: C
Question
Consider the following project balances for a typical investment project with the service life of four years:
n An($) Project Balance 9$)
0 -1000 -1000
1 ( ) -1300
2 ( ) -600
3 2160 1500
4 ( ) 4650
(a) Determine the interest rate used in computing the project balances.
(b) Construct the original cash flows of the project.
(c) Would this project be acceptable at a MARR of 12%, compounded annually? Give reason(s)
Explanation / Answer
The cashflows are calculated by taking cumulative cash balances given in the questions.
NPV is positive $ 6,417.37, thus this project should be accepted.
PV of cash flows is calculated as = Cash flow/ ( 1+r)^t
Where r is the rate of interest and t is the number of period.
Original Cash flow Balance 0 (1,000) (1,000) 1 (300) (1,300) 2 700 (600) 3 2,160 1,500 4 3,090 4,650