Homework:Chapter 1

Question 6, P 8-23 (similar to)

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You have just been offered a contract worth

$1.08

million per year for

6

years. However, to take the contract, you will need to purchase some new equipment. Your discount rate for this project is

12.3%.

You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive

NPV?

The most you can pay for the equipment and achieve the

12.3%

annual return is

$nothing

million.