Question
Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8. Year Net Cash
Star City is considering an investment in the community center that is expected to return the following cash flows: Use Exhibit A.8.
Year | Net Cash Flow | ||
1 | $ | 34,000 | |
2 | 64,000 | ||
3 | 94,000 | ||
4 | 94,000 | ||
5 | 114,000 | ||
This schedule includes all cash inflows from the project, which will also require an immediate $214,000 cash outlay. The city is tax-exempt; therefore, taxes need not be considered.
a. What is the net present value of the project if the appropriate discount rate is 24 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
b. What is the net present value of the project if the appropriate discount rate is 14 percent? (Round PV factor to 3 decimal places. Negative amount should be indicated by a minus sign.)
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