Answered

Get the information you need with the help of IDNLearn.com's expert community. Get accurate and detailed answers to your questions from our dedicated community members who are always ready to help.

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 your participation in this forum. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. Your questions deserve accurate answers. Thank you for visiting IDNLearn.com, and see you again for more solutions.