Aerospace Dynamics will invest $135,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth yearâs cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Year Cash Flow 1 $ 46,000 2 54,000 3 68,000 4 (53,000 ) 5 120,000
a. What is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
Net present value $
b. Should the project be undertaken? Yes No
| Aerospace Dynamics will invest $135,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. (Note that the fourth yearâs cash flow is negative.) Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. |
| Year | Cash Flow | |||
| 1 | $ | 46,000 | ||
| 2 | 54,000 | |||
| 3 | 68,000 | |||
| 4 | (53,000 | ) | ||
| 5 | 120,000 | |||
| a. | What is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) |
| Net present value | $ |
| b. | Should the project be undertaken? | ||||
|
Related questions
Waste Industries is evaluating a $52,800 project with the following cash flows.
| Years | Cash Flows | |||
| 1 | $ | 9,040 | ||
| 2 | 15,200 | |||
| 3 | 19,500 | |||
| 4 | 16,800 | |||
| 5 | 25,800 | |||
| | ||||
The coefficient of variation for the project is .895.
| Coefficient of Variation | Discount Rate | ||||||
| 0 | â | .25 | 5 | % | |||
| .26 | â | .50 | 10 | % | |||
| .51 | â | .75 | 12 | % | |||
| .76 | â | 1.00 | 19 | % | |||
| 1.01 | â | 1.25 | 20 | % | |||
| | |||||||
Use 
a. Select the appropriate discount rate.
| 5% | |
| 10% | |
| 12% | |
| 19% | |
| 20% |
b. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate
Net Present Value:
calculations and round your answer to 2 decimal places.)
c. Based on the net present value should the project be undertaken?
| Yes | |
| No |
