A new computer system will require an initial outlay of $18,000
Question
A new computer system will require an initial outlay of $18,000, but it will increase the firm’s cash flows by
$3,600 a year for each of the next 6 years.
| a. | Calculate the NPV and decide if the system is worth installing if the required rate of return is 8%. What if it is 13%? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Rate of Return | NPV | Worth Installing | |
| 8% | $ | (Click to select)NoYes | |
| 13% | $ | (Click to select)NoYes |
| 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.) |
| Maximum discount rate | % |
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