4.4(b) A project requires an initial cash outlay of $1,000 and a ﬁnal investment of$600 at the end of year 2, and is expected to generate $1,750 at the end ofthe ﬁrst year. Calculate the net present value of the cash ﬂows by using: (b) iF1 = 4% and iF2 = 5.5%.

4.4(b) A project requires an initial cash outlay of $1,000 and a ﬁnal investment of$600 at the end of year 2, and is expected to generate $1,750 at the end ofthe ﬁrst year. Calculate the net present value of the cash ﬂows by using: (b) iF1 = 4% and iF2 = 5.5%.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Question

(b) iF1 = 4% and iF2 = 5.5%.

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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