Compute the NPV for Project M if the appropriate cost of cap

Compute the NPV for Project M if the appropriate cost of capital is 8 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your final answer to 2 decimal places.) Time: Cash flow 3,100 $710 $840 $880 $960 $460 NPV Should the project be accepted or rejected? ORejected Accepted

Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=710/1.08+840/1.08^2+880/1.08^3+960/1.08^4+460/1.08^5

=$3094.84

NPV=Present value of inflows-Present value of outflows

=$3094.84-$3100

=-$5.16(Approx)(Negative).

Hence since NPV is negagtive;project must be rejected.