5. A 6-month project has been proposed. The discount rate set by management for this type of project is 8%. See below for the project’s financial analysis, then answer the questions that follow:

a. What is the project’s net present value (NPV)?

b. Based only on the project’s NPV, should this project be eligible for further consideration? Why or why not? Explain fully in your own words.

Transcribed Image Text:

Di scount rate 8% Assume the project is done in year 0 Project duration (in months): Year 2 3 Total Costs 140,000 40,000 40,000 40,000 Discount á ctor 1.00 0.93 0.86 0.79 Di scounted costs 140,000 37,037 34,294 31,753 243,084 Benefits 200,000 200,000 0.86 200,000 Discount actor 1.00 0.93 0.79 Di scounted benefits 185,185 171,468 158,766 515,419 Di scount rate 8% Assume the project is done in year 0 Project duration (in months): Year 2 3 Total Costs 140,000 40,000 40,000 40,000 Discount á ctor 1.00 0.93 0.86 0.79 Di scounted costs 140,000 37,037 34,294 31,753 243,084 Benefits 200,000 200,000 0.86 200,000 Discount actor 1.00 0.93 0.79 Di scounted benefits 185,185 171,468 158,766 515,419

Answer rating: 100% (QA)

Before performing the calculations corresponding to the NPV it should be clarified that the attached table shows a cash flow in which it is necessary ... View the full answer