How high can the discount rate be before you would reject


A new computer system will require an initial outlay of $15,000, but it will increase the firm's cash flows by $3,000 a year for each of the next 6 years.

a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

NPV ?

WORTH INSTALLING ?

b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

NPV ?

WORTH INSTALLING ?

c. 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 ?%

Solution Preview :

Prepared by a verified Expert
Business Economics: How high can the discount rate be before you would reject
Reference No:- TGS02912110

Now Priced at $10 (50% Discount)

Recommended (98%)

Rated (4.3/5)