Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the

Question:

Crescent Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses an 18 percent for projects like this, should management go ahead with the project?
Year Cash Flow
0 ............... −$3,300,000
1 .................... 875,123
2 ..................... 966,222
3 ................. 1,145,000
4 .................. 1,250,399
5 .................. 1,504,445
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...