Question

3. Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80,000. The future cash inflows from the project are $40,000, $40,000, $30,000 for years 1,2,3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 12%. Will Dweller accept the project?

a) Dweller accepts the projet because it has a positive NPV of over $28,000.

b) Dweller rejects the project because the NPV is less than -$4,000

c) Dweller accepts the project because the NPV is greater than $30,000

d) Dweller rejects the project because the NPV is -$3,021.

HOW DO I DO THIS QUESTION ON A GRAPHING CALCULATOR?

Answer 1

Go to Apps ---> Enter 1 for Finance ----> Select option for NPV ---> Enter information in the format given below and compute.

NPV(rate, cash flow 0, {cash flow 1, cash flow 2, cash flow 3, cash flow 4})

NPV(12, -80000, {40000, 40000, 30000, 3000}) (Answer is 28,020.99 Option a, if Year 3 and Year 4 cash flows are 30,000 each.)

Or if the Year 3 cash flow is 40,000 and Year 4 cash flow is 30,000, answer is 35,138.79 (Option c)

1). Remember to use the (-) key for entering minus, not the regular -.

2). Do not enter the % sign when entering the rate. Only the number will do.

(Note: one of the annual cash flows is missing in the question. Please enter in the calculator accordingly.)