Answer:
a-1. NPV for the project is $8,381,576.17
a-2. A. Yes. Accept the Project.
b. 40.84 % and 40.84 %
Explanation:
The Net Present Value can be determined using a Financial Calculator as follows :
-38,600,000 CFj
62,600,000 CFj
- 11,600,000 CFj
11 % I/YR
Shift NPV $8,381,576.17
A Company should accept projects that have a positive Net Present Value.Therefore, Accept this project.
Calculation of the Internal Rate of Return using a Financial Calculator :
-38,600,000 CFj
62,600,000 CFj
- 11,600,000 CFj
Shift IRR 40.84 %
<u>Answer:</u> Sunk cost
<u>Explanation:</u>
Sunk cost means the expense which has been already met by the firm and they cannot be recovered at any rate. Sunk costs are not based on the future decisions as these expenses for the firm are the same irrelevant to the project which it is assigned. Sunk costs are not a part of the budget plan.
In the given scenario the delivery company has spent $3500 in order to upgrade the truck. So $3500 is treated as sunk cost in the proposed project.
Answer:
the real rate of return is 2.78%
Explanation:
The computation of the real rate of return is shown below:
The real rate of return is
(1 + nominal rate of return) = (1 + real rate of return) × (1 + inflation rate of return)
Real rate of return = (1 + nominal rate of return) ÷ (1 + inflation rate of return) - 1
= (1 + 0.0575) ÷ (1 + 0.0289) - 1
= 0.027796676
= 2.78%
hence, the real rate of return is 2.78%
We simply applied the above formula so that the correct value could come
And, the same is to be considered
Answer:
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Explanation:
