Question
You are planning for a project to give you a return in the next 10 years. Expected costs and returns are presented in the table
You are planning for a project to give you a return in the next 10 years. Expected costs and returns are presented in the table below:
- Calculate the Net Present Value (NPV) using a discount rate of 5% and present your decision
2.calculate Net Present Value using a discount rate of 10% and present your decision in the Answer box. [10 points]
3.What decision do you expect if you calculate the Net Present Value using 15% discount rate? Present your answer in the box without calculating the Net Present Value.
4.What is the Internal Rate of Return (IRR)? The calculated IRR for the above project is 7%. What does this mean? How can you use this information to make a decision about the project? [10 points]
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
Cost | 200,000 | 100,000 | 36,100 | 26,100 | 26,100 | 26,100 | 26,100 | 26,100 | 26,100 | 26,100 | 26,100 |
Return | 0 | 30,000 | 60,000 | 60,000 | 66,785 | 80,000 | 80,000 | 80,000 | 80,000 | 80,000 | 60,000 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started