33. Replacement Decision. A forklift will last for only 2 more years. It costs $5,000 a year...
Question:
33. Replacement Decision. A forklift will last for only 2 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new lift that can last for 10 years and should require main- tenance costs of only $2,000 a year. (LO4)
a. If the discount rate is 4% per year, should you replace the forklift?
b. What if the discount rate is 12% per year? Why does your answer change?
34. NPV/IRR. Growth Enterprises believes its latest project, which will cost $80,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $5,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 5%.
a. If the discount rate for this project is 10%, what is the project NPV? (LOI)
b. What is the project IRR? (LO2)
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus