Question
Row Hamilton Inc. is considering investing in new boathouses working with solar energy for energy saving purposes. Assume that the expected annual cash inflows from
Row Hamilton Inc. is considering investing in new boathouses working with solar energy for energy saving purposes. Assume that the expected annual cash inflows from new boathouses will be $10,000. A $35,000 net initial investment is required and they have five-year useful life and 12% required rate of return. Assume that the investment will occur immediately after management approves the project.
For making decision on whether to approve or reject the project, compute the Net Present Value (NPV) of this new investment and analyze whether it will be accepted or rejected and why. (10 marks)
To determine a rate at which NPV will be zero, compute Internal Rate of Return and analyze the result. (10 marks)
Compute paypack period and analyze the result. (5 marks)
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