Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume the firm invests $126,000 today to get $35,000 at Year 1 (i.e. one year from now), $26,000 at Year 2, $42,000 at Year 3,

image text in transcribed
image text in transcribed
Assume the firm invests $126,000 today to get $35,000 at Year 1 (i.e. one year from now), $26,000 at Year 2, $42,000 at Year 3, $43,000 at Year 4,$39,500 at Year 5 , and $26,500 at Year 6 . Assuming the required rate of return for the firm's industry is 11.6%, what is this project's net present value? $26,363.08$20,711.42$23,325.98$19,236.43 Question 7 2.5 pts Same facts as above, but assume that the firm expands its investment such that the revenues will go up by 23%, but the discount rate will also increase to 20.5%. What is the new net present value (NPV)? $20.711.42$54,455.05$42,236,34$16,131.95 Same facts as Questions 6 and 7: Which of the following best describes how this project's net present value changes based on the increase in revenues by 23% and a corresponding increase in the discount rate to 20.5% ? The NPV slightly increased because of the increase in revenues increased the NPV while the increase in the discount rate did not affect the NPV. The NPV slightly increased because the increase in NPV from the increase in revenues outweighed the decrease in NPV from the increase in the discount rate. The NPV slightly decreased because the decrease in NPV from the increase in discount rates outweighed the increase in NPV from the increase in revenues. The NPV slightly decreased because the discount rate increased, and the increase in revenues did not affect the NPV's amount

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Intelligence An Entrepreneurs Guide Volume 1

Authors: Income Mastery

1st Edition

1647772648, 978-1647772642

Students also viewed these Finance questions

Question

=+Show that un is finitely additive and countably subadditive on o.

Answered: 1 week ago

Question

denigration of emotional outbursts; being reserved;

Answered: 1 week ago