Suppose a new pump costs $600. It has a useful life of 5 years. In each of

Question:

Suppose a new pump costs $600. It has a useful life of 5 years. In each of those five years the operating costs of the pump are $50 and the returns to the pump are $200.
Put this information into a spreadsheet and
a. Find the NPV using a 7% Find the NPV using a 10% What happens to NPV when the increases?
d. Find the IRR.
Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...