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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?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Can you please explain to me how the NPV of this project = 2,258.15

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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
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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