Calculating NPV [LO1] For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent?
Year Cash Flow
The NPV decision rule states that only projects with a positive NPV should be accepted.
a) At 11%
NPV= -26,000+ 11,000/1.11+ 14,000/1.112+ 10,000/1.113
= -26,000 + 28,584.53
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