# A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: Year Cash Flow 0 –\$ 34,000 1 15,000 2 17,000 3 13,000 What is the NPV of the project if the required return is 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) At a required return of 11 percent, should the firm accept this project? Yes No What is the NPV of the project if the required return is 24 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) At a required return of 24 percent, should the firm accept this project? Yes No

Given,

CF0 = -34000

CF1 = 15000

CF2 = 17000

CF3 = 13000

r = 11% or 0.11

NPV = -CF0 + CF1/(1+r) + CF2/(1+r)2 + CF3/(1+r)3

= -34000 + 15000/(1+0.11) + 17000/(1+0.11)2 + 13000/(1+0.11)3

= \$2816.58

Since NPV >0, the stable should sanction the plan

When r = 24% or 0.24,

NPV =

= -34000 + 15000/(1+0.24) + 17000/(1+0.24)2 + 13000/(1+0.24)3

= \$-4028.70

Since NPV < 0 , the stable should referable sanction the plan at r = 24%