Question: A new computer system will require an initial outlay of $14,150, but it will increase the firm's cash flows by $3,100 a year for
A new computer system will require an initial outlay of $14,150, but it will increase the firm's cash flows by $3,100 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%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing $ 942.10 Yes b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 15%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing $ (1,252.70) No c. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Maximum discount rate %
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
