Question
A new computer system will require an initial outlay of $18,500, but it will increase the firms cash flows by $3,700 a year for each
A new computer system will require an initial outlay of $18,500, but it will increase the firms cash flows by $3,700 a year for each of the next 7 years.
a. | Calculate the NPV and find out if the system worth installing if the required rate of return is 10%? What if it is 15%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) |
Rate of Return | NPV | Worth Installing |
10% | $ | (Click to select)NoYes |
15% | (Click to select)YesNo | |
b. | How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Maximum discount rate | % |
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