For the given cash flows, suppose the firm uses the NPV decision rule. At a requ
ID: 2792172 • Letter: F
Question
For the given cash flows, suppose the firm uses the NPV decision rule.
At a required return of 9 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV $
At a required return of 21 percent, what is the NPV of the project? (A negative answer 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
Explanation / Answer
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=63000/1.09+76000/1.09^2+60000/1.09^3
=$168096.85
NPV=Present value of inflows-Present value of outflows
=$168096.85-$153000
=$15096.85(Approx)
At 21%:
Present value of inflows=63000/1.21+76000/1.21^2+60000/1.21^3
=$137843.57
NPV =$137843.57-$153000
=-$15156.43(Negative).