A new computer system will require an initial outlay of $19,000, but it will increase the firm's
Question:
A new computer system will require an initial outlay of $19,000, but it will increase the firm's cash flows by $3,800 a year for each of the next 8 years.
a.Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
b.Calculate the NPV and decide if the system is worth installing if the required rate of return is 14%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
c. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
rev: 09_20_2017_QC_CS-101204
Study Guide To Accompany Fundamentals Of Corporate Finance
ISBN: 9780073012421
5th Edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus