CHAPTER 9 REVIEW A project has the cash flows given below. YEAR 0 1 2 3 4 5 Cash flow -$10,000 $2,500 $3,500 $5,000 $4,000 $2,000 1). Assuming a required return of 12%, what is the NPV of the project? Should you accept it?
CHAPTER 9 REVIEW A project has the cash flows given below. YEAR 0 1 2 3 4 5 Cash flow -$10,000 $2,500 $3,500 $5,000 $4,000 $2,000 1). Assuming a required return of 12%, what is the NPV of the project? Should you accept it?
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
Section: Chapter Questions
Problem 23SP
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Transcribed Image Text:CHAPTER 9 REVIEW
A project has the cash flows given below.
•
YEAR
0
1
2
Cash flow -$10,000
$2,500
$3,500
3
4
$5,000 $4,000 $2,000
5
1). Assuming a required return of 12%, what is the NPV of the project? Should you
accept it?
2). Assuming a required return of 12%, what is the IRR of the project? Should you
accept it?
3). What is the payback period of the project? If the required payback period is 3
years, should you accept it?
4). Assuming a required return of 12%, what is the discounted payback period of
the project? If the required payback period is 3 years, should you accept it?
5). Assuming a required return of 12%, what is the profitability index of the
project? Should you accept it?
SOLUTION
1). NPV 2,258.15 >0 accept
9-23
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