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blsea [12.9K]
4 years ago
10

Darling Entreprises is evaluating a proposed capital budgeting project that will require an initial investment of $180,000. The

project is expected to generate the following net cash flows:Year Cash FlowYear 1 $46,600Year 2 $52,000Year 3 $49,500Year 4 $49,400a. Assume the desired rate of return on a project of this type is 10%. What is the net present value of this project?A. -$23,730.21B. $18,304.10C. -$4,415.10D. -$18,163.50b. Suppose Darling Enterprises has enough capital to fund the project, and the project is not competing for funding with other projects. Should Darling Enterprises' acceptor reject this project?A. Reject the projectB. Accept the project
Business
1 answer:
Natali [406]4 years ago
5 0

Answer:

The Net Present Value of the project is A) -$23,730.21. Since the project is not increasing the wealth of shareholders, and the NPV is negative so we should reject the Project.

Explanation:

If the company invest in the project, its shareholders' wealth will be reduced by $23,730.21. No management would do so because its objective is to increase Shareholders' wealth and not to reduce it.

I have attached an Excel File. Go through it. It will help you to understand the calculations.

Thanks!

Download xlsx
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