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20 May, 21:30

A project has a required return of 12.6 percent, an Initial cash outflow of $42.100, and cash Inflows of $16,500 In Year 1, $11,700 In Year 2, and $10,400 In Year 4. What is the net present value? Multiple Choice

a. - $11,748.69

b. - $10.933.52

c. - $11,208.62

d. - $10.457.09

e. - $12.006.13

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Answers (1)
  1. 20 May, 21:35
    0
    a. - $11,748.69

    Explanation:

    Use following formula to calculate the Present values:

    PV = FV / (1+r) ^n

    r = 12.6%

    1. PV = $16,500 x (1+12.6%) ^-1 = $14,654

    2 PV = $11,700 x (1+12.6%) ^-2 = $9,228

    3 PV = $10,400 x (1+12.6%) ^-4 = $6,470

    Year Cash flow Present Value

    0 ($42,100) ($42,100)

    1 $16,500 $14,654

    2 $11,700 $9,228

    4 $10,400 $6,470

    NPV $11,748
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