Diana, Industries is considering a project which has the following cash flows: Year Cash Flow 0 ? 1 $4,000 2 4,000 3 3,000 4 1,500 The project has a payback period of 2.5 years. The firm’s cost of capital is 12 percent. What is the project’s net present value (NPV)? What does the NPV rule advice regarding this investment opportunity?
Diana, Industries is considering a project which has the following cash flows: Year Cash Flow 0 ? 1 $4,000 2 4,000 3 3,000 4 1,500 The project has a payback period of 2.5 years. The firm’s cost of capital is 12 percent. What is the project’s net present value (NPV)? What does the NPV rule advice regarding this investment opportunity?
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 3CMA
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Question
Diana, Industries is considering a project which has the following cash flows:
Year |
Cash Flow |
0 |
? |
1 |
$4,000 |
2 |
4,000 |
3 |
3,000 |
4 |
1,500 |
The project has a payback period of 2.5 years. The firm’s cost of capital is 12 percent.
- What is the project’s
net present value (NPV)? - What does the NPV rule advice regarding this investment opportunity?
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