FIN$-320$

$($Net present value$$ calculation$)$Big$$ Steve's, makers of swizzle$$ sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $$$$110000$ and will generate net cash inflows of $$$$20000$ per year for $9$ years.

a$.$What is the$$ project's NPV using a discount rate of $8$ percent$?$ Should the project be$$ accepted? Why or why$$ not?

b$.$What is the$$ project's NPV using a discount rate of $14$percent$?$ Should the project be$$ accepted? Why or why$$ not?

c$.$What is this$$ project's internal rate of$$ return? Should the project be$$ accepted? Why or why$$ not?

Question content area bottom

Part $1$

a$.$If the discount rate is $8$percent$,$ then the$$ project's NPV is $$$

$$

enter your response here. $($Round to the nearest$$ dollar.$)$

a$.$ What is the project's NPV using a discount rate of $9$ percent? Should the project be accepted? Why or why not?

b$.$ What is the project's NPV using a discount rate of $14$ percent? Should the project be accepted? Why or why not?

c$.$ What is this project's internal rate of return? Should the project be accepted? Why or why not?

a$.$ If the discount rate is $9$ percent, then the project's NPV is $$924.($Round to the nearest dollar.$)$

The projec

accepted because the NPV is

and therefore

value to the firm. $($Select from the drop$-$down menus.$)$

b$.$ If the discount rate is $14$ percent, then the project's NPV is $$-15,858.($Round to the nearest dollar.$)$

The project should not be accepted because the NPV is negative and therefore does not add value to the firm. $($Select from the drop$-$down menus.$)$

c$.$ This project's internal rate of return is ${9\mathrm{.}24}^{TT}\%.($Round to two decimal places.$)$

If the project's required discount rate is $9\%,$ then the project

accepted, because the IRR is higher than the required discount rate. $($Select from the drop$-$down menus.$)$

If the project's required discount rate is $14\%,$ then the project

accepted, because the IRR is lower than the required discount rate. $($Select from the drop$-$down menus.$)$ a$.$ What is the project's NPV using a discount rate of $9$ percent? Should the project be accepted? Why or why not?

b$.$ What is the project's NPV using a discount rate of $14$ percent? Should the project be accepted? Why or why not?

c$.$ What is this project's internal rate of return? Should the project be accepted? Why or why not?

a$.$ If the discount rate is $9$ percent, then the project's NPV is $$924.($Round to the nearest dollar.$)$

The projec

accepted because the NPV is

and therefore

value to the firm. $($Select from the drop$-$down menus.$)$

b$.$ If the discount rate is $14$ percent, then the project's NPV is $$-15,858.($Round to the nearest dollar.$)$

The project should not be accepted because the NPV is negative and therefore does not add value to the firm. $($Select from the drop$-$down menus.$)$

c$.$ This project's internal rate of return is ${9\mathrm{.}24}^{TT}\%.($Round to two decimal places.$)$

If the project's required discount rate is $9\%,$ then the project

accepted, because the IRR is higher than the required discount rate. $($Select from the drop$-$down menus.$)$

If the project's required discount rate is $14\%,$ then the project

accepted, because the IRR is lower than the required discount rate. $($Select from the drop$-$down menus.$)$

Pictures attached are correct answers.