Problem 8-10 NPV and IRR (LO1, LO2)

A project that costs $3,600 to install will provide annual cash flows of $1,100 for each of the next 6 years.

a. What is NPV if the discount rate is 10%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

	NPV

b. 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.)

Discount rate

%

A proposed nuclear power plant will cost $1.2 billion to build and then will produce cash flows of $200 million a year for 15 years. After that period (in year 15), it must be decommissioned at a cost of $800 million. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in billions rounded to 3 decimal places.)

a. What is the NPV of the project if the discount rate is 3%?

Net present value

billion

b. What is the NPV of the project if the discount rate is 18%?

Net present value

billion