Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

. . . Thomas Cruise has invested a new motorboat at $10,000 that a life of 10 years and no salvage. On the basis of

image text in transcribed

. . . Thomas Cruise has invested a new motorboat at $10,000 that a life of 10 years and no salvage. On the basis of today's economic environment, it is estimated that operating costs will be $500 a year revenue $2000 per year the general inflation rate will be 5% (f = 0.05) operation cost will be escalate at the same rate as general inflation a revenue will not increase with time If the rate of interest is 10% (i = 0.10), what is the Net Present Value of the investment? Is the investment viable? (NPV=-$1617 Since the NPV value is negative. The investment is NOT viable.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Measuring And Managing The Value Of Companies

Authors: McKinsey & Company Inc., Tom Copeland, Tim Koller, Jack Murrin

3rd Edition

0471361909, 978-0471361909

More Books

Students also viewed these Finance questions