A project requires an initial outlay of P 100 000. The relevant inflows associated with the project are P 60 000 in year one and P 50 000 in years two and three. The appropriate discount rate for this project is 11%. Compute the net present value. Should the company accept the project?

A project requires an initial outlay of P 100 000. The relevant inflows associated with the project are P 60 000 in year one and P 50 000 in years two and three. The appropriate discount rate for this project is 11%. Compute the net present value. Should the company accept the project?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 14P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A project requires an initial outlay of P 100 000. The relevant inflows
associated with the project are P 60 000 in year one and P 50 000 in years two
and three. The appropriate discount rate for this project is 11%. Compute the
net present value. Should the company accept the project?

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