Uses the net present value method

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Reference no: EM131859655

1. Dana Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $ 110,000 . The future cash inflows from its project are $30,000, $25,000, $50,000 and $40,000 for years 1, 2, 3 and 4, respectively. Dana uses the net present value method and has a discount rate of 10 %. Will Dana accept the project?

Dana accepts the project because the NPV is greater than $2800

Dana rejects the project because the NPV is less than -$4,000

Dana rejects the project because the NPV is -$3,021

Dana accepts the project because the NPV is greater than $3000

2. Kariana Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $ 190,000 . The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $40,000, $70,000 and $45,000. Kariana uses the net present value method and has a discount rate of 12 %. Will Kariana accept the project?

Kariana rejects the project because the NPV is about -$35,046.46

Kariana rejects the project because the NPV is about -$12,375.60

Kariana accepts the project because the NPV is greater than $20,000.00

Kariana rejects the project because the NPV is about -$2,375.60

Reference no: EM131859655

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