With discount rate of 7% and cashflow timeline of Yr.0=cash outflow(cost) of $3,000; Yr.1=cash inflow of $1,000; Yr.2=cash inflow $1,050; Yr.3=cash inflow $1,100; Yr.4=cash inflow $900
What's the net present value? Should we accept or reject?
The Present value = $3,436.22 > $3000
Net Present value + $436.22 for 7%
Since NPV is positive, we can accept the project
The IRR is that value of r that satisfies
The value turns
out to be 13.35%
Since it is
> 7%, the project can be accepted
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