Question: A new computer system will require an initial outlay of $ 1 6 , 0 0 0 , but it will increase the firm s

A new computer system will require an initial outlay of $16,000, but it will increase the firms cash flows by $3,200 a year for each of the next 8 years.
a. Calculate the NPV and decide if the system is worth installing if the required rate of return is 9%.(NPV: -1.711,42) b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 14%(NPV: 1,155.64). c. How high can the discount rate be before you would reject the project? can you answer c option according to the information that gave you?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

A new computer system will require an initial outlay of $24,000, but will increase the firm's cash flows by $4,800 a year for each of the next 6 years. a. Calculate the NPV and decide if the system...

Q:

b b. calculate the NPV and decide if the system is worth noting the date of retum month Indicated by a minus sign. Do not round Intermediate calculations. Round your new 2 Net procent value Worth...

Q:

A new computer system will require an initial outlay of $15,000, but will increase the firms' cash each of the next 6 years. a. Calculate the NPV and decide if the system is worth installing if the...

Q:

A new computer system will require an initial outlay of $20,000 but will increase the firms cash flow's by $4000 a year for each of the next 8 years what is the IRR of this project

Q:

LISTING OF EQUATIONS 8.1 NPV = PV - required investment 8.2 Profitability index = net present value initial investment 8.3 Equivalent annual annuity = present value of costs annuity factor QUESTIONS...

Q:

1. value: 1.44 points The following are the cash flows of two projects: Year Project A Project B 0 $400 $400 1 230 300 2 230 300 3 230 300 4 230 a. If the opportunity cost of capital is 10%,...

Q:

MetaA new computer system will require an initial outlay of $ 2 0 , 0 0 0 , but it will increase the firm s cash flows by $ 4 , 0 0 0 a year for each of the next 8 years. Calculate the NPV and decide...

Q:

A new computer system will require an initial outlay of $20,250, but it will increase the firms cash flows by $4500 a year for each of the next 6 years. A new computer system will require an initial...

Q:

O lu. 1:1 FINA 306 MINICASE EXCEL Spring... A Administrative matters 1. Assignment will be done by using Microsoft Excel and Word. 2. The deadline for the assignment is 13th May, 2020, Wednesday....

Q:

(i) The following are the cash flows of two independent projects: Year Project A Project B 0 $(370) $(370) 1 200 270 2 200 270 3 200 270 4 200 a. If the opportunity cost of capital is 10%, calculate...

Q:

ABC Corp. sells A's and B's. A's have a selling price of $5 and a variable cost of $3. B's have a selling price of $8 and a variable cost of $5. Fixed costs for ABC are $2000 per month. In a regular...

Q:

Recall from class: (X, X... X,) is said to be jointly distributed as a Multinomial (n; p. p....pr) if for any set of integers n.....n, with 0

Q:

How can you tell if a print magazine is financially healthy? Celebrity cover Dimensions/width and height Glossy cover Number of pages/thickness

Q:

P-1) (100 Pts.) A chemical manufacturing company (CMC) has a contract for the procurement of the neccssaly chemicals from four suppliers. The chemicals purchased from Supplier A are priced at $20...

Q:

Every October, your company has an open enrollment period during which employees select their health and dental plans for the next calendar year. Once the open-enrollment period ends, no coverage...

Q:

Assume the role of the vice president of sales at Rampart Publishing. Early in February, you attended a professional conference in another state. Dr. Daniel Loman, the motivational speaker who...

Q:

Technology.Global.Dahui Lian, a Shanghai official with whom you have met on several past visits to China, is planning to come to the United States.Through your visits and subsequent e-mail exchanges,...