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Use the following information to calculate the NPV for an overseas expansion: Year Cash Flow 0 -$25,000 1 10,000 2 20,000 3 30,000 What is the NPV...

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Accounting

Use the following information to calculate the NPV for anoverseas expansion:

Year

Cash Flow

0

-$25,000

1

10,000

2

20,000

3

30,000

What is the NPV at a required return of 7%?  Shouldthe firm accept the project?  What if the required returnis 14%?

Answer & Explanation Solved by verified expert
4.4 Ratings (1037 Votes)

Ans. NPV at 7% :-
Year Cash Flow PV Factor Present Value of Cash Flow
0        (25,000) -                         (25,000)
1           10,000 0.935                              9,346
2           20,000 0.873                            17,469
3           30,000 0.816                            24,489
Total Net present value                            26,304
Yes, the firm has to accept the project.
NPV at 14% :-
Year Cash Flow PV Factor Present Value of Cash Flow
0        (25,000) -                         (25,000)
1           10,000 0.877                              8,772
2           20,000 0.769                            15,389
3           30,000 0.675                            20,249
Total Net present value                            19,410
Yes, the firm has to accept the project.

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Use the following information to calculate the NPV for anoverseas expansion:YearCash Flow0-$25,000110,000220,000330,000What is the NPV at a required return of 7%?  Shouldthe firm accept the project?  What if the required returnis 14%?

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