You have just been offered a contract worth $1 million per year for five years However, to take the contract, you will need to purchase some new equipment Your discount rate for this project is 12 You are still negotiating the purchase price of the equipment What is the most you can pay for the equ...

Plan Compute the NPV of the project Execute The timeline of the investment opportunity ...

You have just been offered a contract worth $1 million per year for five years. However, to

Question:

You have just been offered a contract worth $1 million per year for five years. However, to take the contract, you will need to purchase some new equipment. Your for this project is 12%. You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV?

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...