**Project Analysis: Net Present Value Calculation**A company is considering a project that requires an initial cost of $8,000. The project will generate after-tax net cash inflows of $100 in year one, $700 in year two, $6,000 in year three, $11,000 in year four, and $12,000 in year five. What is the NPV using 4% as the discount rate?**NOTE:** Enter amounts rounded to two decimals (e.g., 78.76 or 40.00).| Year | Net Cash Inflow | PV ||------|-----------------|----|| 0 | $100 | || 1 | $700 | || 2 | $6,000 | || 3 | $11,000 | || 4 | $12,000 | || 5 | | || | NPV Total | |To calculate NPV, use the following formula for each year:\[PV = \frac{\text{Net Cash Inflow}}{(1 + r)^t}\]where $r$ is the discount rate (4% or 0.04) and $t$ is the year. Then, sum all the present values and subtract the initial investment amount to calculate the NPV.The table above outlines the project details with columns for each year, corresponding net cash inflows, and placeholders for the Present Value (PV) calculations.This section is followed by the calculation of NPV (Net Present Value) for the project considering the provided data. **Project Analysis**An educational examination of Net Present Value (NPV) calculation using a practical example:**Project Investment and Cash Inflows:**- **Initial Cost:** $8,000- **Year 1 Cash Inflow:** $100- **Year 2 Cash Inflow:** $700- **Year 3 Cash Inflow:** $6,000- **Year 4 Cash Inflow:** $11,000- **Year 5 Cash Inflow:** $12,000*Calculate the NPV using a discount rate of 4%.*| Year | Net Cash Inflow | PV (Present Value) ||------|-----------------|--------------------|| 0 | -$8,000 | || 1 | $100 | || 2 | $700 | || 3 | $6,000 | || 4 | $11,000 | || 5 | $12,000 | |**NOTE:** Enter amounts rounded to two decimals (e.g., 78.16 or 40.00).**Graph Explanation:**The table illustrates the year-wise breakdown of expected net cash inflows and the initial project cost. For each year from 0 to 5, it specifies the net cash inflow and provides a column to record the present value (PV) for each cash inflow at the 4% discount rate. The PV column is intended to help with the NPV calculation by applying the formula for discounting future cash flows.To complete the exercise, calculate the present value for each cash inflow using the formula: PV = Cash Inflow / (1 + r)^t, where:- PV is the Present Value,- Cash Inflow is the cash inflow for the respective year,- r is the discount rate (4% or 0.04),- t is the year.Finally, sum the present values of the cash inflows and subtract the initial cost to determine the NPV.

Capital budgeting is the process of evaluating and selecting long-term investments that will benefit…

ut of question A company is considering a project that requires an initial cost of $8,000. The project will getra net cash inflows of $100 in year one, $700 in year two, $6,000 in year three, $11,000 in year four en sam in year five. What is the NPV using 4% as the discount rate? NOTE: Enter amounts rounded to two decimals (e.g., 78.76 or 40.00) Net Cash Inflow Year 0 2 3 5 $100 $700 $6,000 $11,000 $12,000 NPV Total $

ut of question A company is considering a project that requires an initial cost of $8,000. The project will getra net cash inflows of $100 in year one, $700 in year two, $6,000 in year three, $11,000 in year four en sam in year five. What is the NPV using 4% as the discount rate? NOTE: Enter amounts rounded to two decimals (e.g., 78.76 or 40.00) Net Cash Inflow Year 0 2 3 5 $100 $700 $6,000 $11,000 $12,000 NPV Total $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Mendez Company has identified an investment project with the following cash flows. Year 1234 Cash Flow $ 1,090 940 1,490 1,850 a. If the discount rate is 12 percent, what is the present value of these cash flows? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the present value at 15 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. What is the present value at 21 percent? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Present value at 12 percent b. Present value at 15 percent c. Present value at 21 percent
A firm evaluates all of its projects by applying the IRR rule. Year Cash Flow 0 -$ 152,000 1 64,000 2 75,000 3 59,000 a. What is the project's IRR? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If the required return is 13 percent, should the firm accept the project? % a. Internal rate of return b. Project acceptance
Consider the following cash flow profile and assume MARR is 10%/year. EOY NCF Part a Determine the ERR for this project. 0 1 2 3 4 5 6 % -$50 $32 $32 $32 $32 $32 $32 Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is ±0.2.
am. 114.
A firm evaluates all of its projects by applying the IRR rule. Cash Flow Year 0 1 2 3 147,000 69,000 70,000 54,000 What is the project's IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Internal rate of return % If the required return is 16 percent, should the firm accept the project?
Vijay
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$350,000 −$35,000 1 25,000 17,000 2 70,000 11,000 3 70,000 17,000 4 430,000 11,000 Assume you require a 15 percent return on your investment and a payback of 4 years. a. If you apply the discounted payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. Based on your answers in (a) and (b), what you can say anything about the IRR of both projects? which project will you finally choose? Why?
Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) -$ -$ 0 1235 4 NO a- Whichever project you choose, if any, you require a return of 14 percent on your investment. Project A Project B 357,000 38,000 58,000 58,000 433,000 a-1. What is the payback period for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) 46,500 23,300 21,300 18,800 13,900 Project A Project B Payback period If you apply the payback criterion, which investment will you choose? 2. O Project A O Project B years years b- What is the discounted payback period for each project? (Do not round intermediate 1. calculations and round your answers to 2 decimal places, e.g., 32.16.) Discounted payback period years years
Nikul
You are given the following cash flow for a project, and told that PW(8%) = $8,300 for this project. What is the value of the unknown payment X for the second and third periods? n Cash Flow 0 -$36,000 1 $0 2 $X 3 $X O Cannot be determined. O $24,842.08 O $26,829.44 O $5,026.74
A project has an initial cash outflow of $40,500 and produces cash inflows of $16,450, $17,800, and $16842 for Years 1 through 3, respectively. What is the NPV at a discount rate of 12.4 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
N2. Account