Question: A $1 million capital investment will generate cash flows of $700,000 at the end of each year for 2 years, after which it will be worthless.
Q1. Compute the net present value using a 10% required rate of return.
Q2. Assume depreciation of $600,000 the first year and $400,000 the second year, compute the economic profit for each year, and compute the present value of the economic profit.