Post by: iveyjurea on Jun 7, 2019
Question 1
A commitment on the project requires an initial outlay of $10 000.00 and a further outlay of $5000.00 after one year. Net returns are $5 000.00 per year for five years. What is the net present value of the project at 16%?Question 2
A project requires an initial outlay of $350 000 and a further outlay of $100 000 after one year. Net returns are $105 000 per year for five years. What is the net present value of the project at 9.9%?Post by: jasonq on Jun 7, 2019
Answer 1
PVOUT = 10 000 + 5 000
= $14 310PVIN = 5000
= $16 371 NPV = 16 371 - 14 310 = $2061
The net present value of the project at 16% is $2061.
Answer 2
PVOUT = 350 000 + 100 000
= $440 992PVIN = 105 000
= $399 052NPV = 399 052 - 440 992 = -$41 940
Since NPV < 0, the rate of return on the project is less than 9.9%.
Post by: addison1212 on Apr 10, 2021