A new computer system will require an initial outlay of $17,000, but it will increase the firm’s cash flows by $3,400 a year for each of the next 7 years.
a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 10%. What if it is 15%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Rate of Return NPV Worth Installing
10% $
15% $
b. How high can the discount rate be before you would reject the project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Maximum discount rate %