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  3. year t=0 t=1 t=2 t=3 t=4 ??? $7,500 $12,500 $15,00

Year t=0 t=1 t=2 t=3 t=4 ??? $7,500 $12,500 $15,000 $17,500 The Payback Period of this project...

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Finance

Year t=0 t=1 t=2 t=3 t=4

??? $7,500 $12,500 $15,000 $17,500

The Payback Period of this project is 2.4 years. The appropriatediscount rate is 13%. Find the Net Present Value of the project.(Note that the cash flow for t=0 is not provided to you – that is,you must first solve for it).

This will be a negative value

Answer & Explanation Solved by verified expert
4.5 Ratings (815 Votes)

Ans NPV = $ 11555.33

Year Project Cash Flows (i) DF@ 13% (ii) DF@ 13% (ii) PV of Project B ( (i) * (ii) )
0 -26000 1 1                    (26,000.00)
1 7500 1 / (1 + 13%)^1 0.885                       6,637.17
2 12500 1 / (1 + 13%)^2 0.783                       9,789.33
3 15000 1 / (1 + 13%)^3 0.693                     10,395.75
4 17500 1 / (1 + 13%)^4 0.613                     10,733.08
NPV                     11,555.33
Cash flow for t = 0 = 2.4 = cash flow of year 1 + year 2 + 0.4 of year 3
7500 + 12500 + 0.4* 15000
26000

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Year t=0 t=1 t=2 t=3 t=4??? $7,500 $12,500 $15,000 $17,500The Payback Period of this project is 2.4 years. The appropriatediscount rate is 13%. Find the Net Present Value of the project.(Note that the cash flow for t=0 is not provided to you – that is,you must first solve for it).This will be a negative value

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