Answered

Join the growing community of curious minds on IDNLearn.com and get the answers you need. Find the answers you need quickly and accurately with help from our knowledgeable and dedicated community members.

A project requires a cost in Year O (right now) of $7M. The project will then provide a revenue of $3M per year for Years 1-3. Your discount rate is 15%. The NPV of the project is: Between 0 and $1M Less than zero Between $1M and $2M O More than $2M

A Project Requires A Cost In Year O Right Now Of 7M The Project Will Then Provide A Revenue Of 3M Per Year For Years 13 Your Discount Rate Is 15 The NPV Of The class=

Sagot :

Answer: Less than zero

Explanation:

Based on the information given, the NPV of the project will be calculated as the present value of cash flow earned minus the initial expenditure.

The present value of cash flow will be:

= 3/(1 + 15%)¹ + 3/(1 + 15%)² + 3/(1 + 15%)³

= 3/(1.15)1 + 3/(1.15)² + 3/(1.15)³

= 3/1.15 + 3/1.3225 + 3/1.520875

= 2.61 + 2.27 + 1.98

= $6.86 million

Then NPV will be:

= $6.86 million - $7 million

= -$1.14 million

Therefore, the correct option is "less than zero".

We appreciate every question and answer you provide. Keep engaging and finding the best solutions. This community is the perfect place to learn and grow together. IDNLearn.com is committed to your satisfaction. Thank you for visiting, and see you next time for more helpful answers.