A company's managers are considering investing in a project that has an expected life of 5 years. The project is expected to generate a positive net present value of $240 000 when cash flows are discounted at 12%. The expected net cash flows of project is $120 000 in each of 5 years. Calculate the percentage decrease (sensitivity) to the nearest 0.1% in the annual net cash inflow that would cause the managers to reject the project from a financial perspective.

A company's managers are considering investing in a project that has an expected life of 5 years. The project is expected to generate a positive net present value of $240 000 when cash flows are discounted at 12%. The expected net cash flows of project is $120 000 in each of 5 years. Calculate the percentage decrease (sensitivity) to the nearest 0.1% in the annual net cash inflow that would cause the managers to reject the project from a financial perspective.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting

Calculate the percentage decrease (sensitivity) to the nearest 0.1% in the annual net cash inflow that would cause the managers to reject the project from a financial perspective.

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

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