Assume an investment has cash flows of −$39,700, $21,750, $18,500, and $12,500 for Years 0 to 3, respectively. What is the NPV if the required return is 12.9 percent? Should the project be accepted or rejected?
A) $1,684.22; reject
B) $2,764.89; accept
C) $2,264.95; reject
D) $1,684.22; accept
E) $2,764.89; reject

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting each cash flow at the required return rate of 12.9% and summing them. The NPV is $2,764.89, which is positive, indicating the project should be accepted.

Assume an Investment Has Cash Flows of −$39,700, $21,750, $18,500