What is the NPV for the project if the required return is 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. $ 3,358.40x NPV
What is the NPV for the project if the required return is 25 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. $ 3,358.40x NPV
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
Problem 1PS
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Concept explainers
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Question
Ll4 just need the wrong answer fixed
Transcribed Image Text:A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:
| Year | Cash Flow |
|------|------------|
| 0 | –$27,800 |
| 1 | $11,800 |
| 2 | $14,800 |
| 3 | $10,800 |
**Question:**
What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
**Answer:**
The NPV (Net Present Value) is calculated to be $2,739.51. The answer is complete and correct.
**Decision:**
At a required return of 11 percent, should the firm accept this project?
- No
- Yes ✔️
The NPV is positive, indicating the project is expected to generate more value than the cost of capital, thus it should be accepted.
The image illustrates a table of cash flows over four years and includes a decision box confirming the project's viability at the given discount rate, with a clear indication to accept the project due to a positive NPV.
Transcribed Image Text:**Project Evaluation and Net Present Value (NPV) Analysis**
**1. Project Acceptance at 11% Required Return**
*Question:*
At a required return of 11 percent, should the firm accept this project?
*Options:*
- No
- Yes (selected with a check mark)
**2. NPV Calculation at 25% Required Return**
*Question:*
What is the NPV for the project if the required return is 25 percent?
*(A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
- The calculated NPV is shown as $3,358.40. It is indicated with a message:
- "Answer is complete but not entirely correct."
**3. Project Acceptance at 25% Required Return**
*Question:*
At a required return of 25 percent, should the firm accept this project?
*Options:*
- Yes
- No
**Notes:**
- Ensure to include any negative signs for negative NPVs.
- Follow precise rounding instructions for accurate calculations.
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