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Homework answers / question archive / Compute the NPV for Project M if the appropriate cost of capital is 8 percent
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
| 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. |
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| 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. |
