You are thinking of signing up for cloud storage online that will be save you $4000...

 

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You are thinking of signing up for "cloud storage" online that will be save you $4000 in physical storage space for 4 years. The cost of signing up is a one-time fee of $10,000 today. In addition, there is yearly cost of $1000 for the storage space. The cloud will reduce working capital by 15% of the amount of savings each year. Your company's tax rate is 30%. The real rate of interest is 4% and inflation in the economy is projected to be 3%. What is the NPV of the project with and without inflation? Would you accept it? You are thinking of signing up for "cloud storage" online that will be save you $4000 in physical storage space for 4 years. The cost of signing up is a one-time fee of $10,000 today. In addition, there is yearly cost of $1000 for the storage space. The cloud will reduce working capital by 15% of the amount of savings each year. Your company's tax rate is 30%. The real rate of interest is 4% and inflation in the economy is projected to be 3%. What is the NPV of the project with and without inflation? Would you accept it?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the project both with and without inflation well need to consider the cash flows over the 4year period First ... View the full answer