Wednesday, 9 July 2014

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

Year Cash Flow
0 –$ 27,400
1 11,400
2 14,400
3 10,400


What is the NPV for the project if the required return is 12 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  NPV $  

At a required return of 12 percent, should the firm accept this project?
Yes

What is the NPV for the project if the required return is 24 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  NPV $  

At a required return of 24 percent, should the firm accept this project?
No


Explanation: