Consider a potential investment project that has an initial cash outlay of -$2,000 now and free cash flows of $600, $700 and $800 over the next three years.

 

(a) If the appropriate discount rate is 10%, calculate the net present value (NPV) of the project. 

Should the project be accepted or rejected? Explain why. 

 

(b) Without doing any calculations, Explain what would happen to the NPV you calculated in Part if you used a discount rate of 8%.