Discussion
Calculate:
Determine the NPV for the Electrobicycle project. Use the annual project cash flow from the table above. For the required rate of return, use the percent value from your birthday date may 20 1974. For example, if your birthday falls on the 16th of the month, the required rate of return would be 16%.
For guidance, review Section 7.1 of the textbook, NPV Example: The Pizza Scooter Delivery Project Revisited.
Write:
In your post, include the following:
Calculate the NPV of the Electrobicycle project. Be sure to show your NPV calculations.
Explain, in your own words, why working capital investments are subtracted each year in the cash flows.
Explain, in your own words, the meaning of the required rate of return for the project.
Assume the auto company has a required rate of return of 15%. Based on the required rate of return you used for the Electrobicycles (based on your birthday date), is the Electrobicycle project more or less risky than the auto company? Explain your answer.
Based on your concluded NPV, should the company invest in this project to build Electrobicycles? Justify your answer.
Guided Response: Review several of your colleagues’ posts, and reply to at least two of your peers by 11:59 p.m. on Day 7 of the week. You must respond to two classmates who have completed different calculations than you. In your written responses to your classmates, address the following:
Confirm the calculations or explain a correction to the calculation in the initial post.
Compare how the required rate of return you used differs from your classmate’s rate of return.
Explain how the different rate of returns impacted the concluded NPV.
Explain why the salvage value is added to the cash flows in the final year of the project.
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