Given the information in Table Below and 15 percent cost of capital,
(a) compute the net present value.
(b) should the project be accepted?
(a)
NPV = (1,000 / 0.15) × [1 - 1 / (1.15)5] - 2,500
= 1,000 × (3.352) - 2,500 = $852
(b) Since NPV > 0, the project should be accepted.
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