Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative amount should be indicated by

Question

Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places.) Project M Time: Cash flow: 0 1 -$1,300 $410 2 $540 3 $580 4 $660 5 $160 NPV Should the project be accepted or rejected? O accepted O rejected

Help In Homework · Accepted Answer

a. NPV 597.03 (Approx.) Working Notes: Notes: NPV is the net present value of cash flows during the life of project which includes cash outflows and cash inflows. A B C = A x B Time Cash flow PVF @ 8% Present Value 0 -1300 1 -1300 1 410 0.925926 379.62966 2 540 0.857339 462.96306 3 580 0.793832 460.42256 4 660 0.73503 485.1198 5 160 0.680583 108.89328 NPV 597.02836 Notes: PVF is calculated @ r% = 1/(1+r%)^n for given case used is (1/(1.08)^n) where n is the period for which PVF is calculated. b. Accepted Working Notes: Project M Should Be accepted as its NPV is positive i.e. 597.03 means it is able to generate more than required cost of capital of 8% , hence the project should be accepted.

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Compute the NPV for Project M if the appropriate cost of capital is 8 percent

Expert Solution

Archived Solution

a.	NPV 597.03	(Approx.)

Working Notes:

Notes:	NPV is the net present value of cash flows during the life of project which includes cash outflows and cash inflows.


	A	B	C = A x B
Time	Cash flow	PVF @ 8%	Present Value
0	-1300	1	-1300
1	410	0.925926	379.62966
2	540	0.857339	462.96306
3	580	0.793832	460.42256
4	660	0.73503	485.1198
5	160	0.680583	108.89328
		NPV	597.02836


Notes: PVF is calculated @ r% = 1/(1+r%)^n for given case used is (1/(1.08)^n) where n is the period for which PVF is calculated.
b.
	Accepted

Working Notes:

	Project M Should Be accepted as its NPV is positive i.e. 597.03 means it is able to generate more than required cost of capital of 8% , hence the project should be accepted.