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please give me a detailed calculation 3. Pedro's Plumbing uses an interest rate of 20% to evaluate new investment projects. The company is considering a
please give me a detailed calculation
3. Pedro's Plumbing uses an interest rate of 20% to evaluate new investment projects. The company is considering a new in-store security system for its Carlton Place branch. The system is budgeted to cost $654,900. The cost will be depreciated over its expected useful life of five years. The new system should increase cash flows by reducing stock shrinkage by $200,000 per year for five years. Because the project is considered to be low risk, it has been suggested that it be evaluated using an interest rate of 14%, not 20%. Required (a) Calculate the net present value at the normal rate of 20%. (b) Calculate the net present value at the low risk rate of 14%. (c) What would happen if the project were to be evaluated at a rate of 16%Step by Step Solution
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