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dimulka [17.4K]
3 years ago
15

An investment has an installed cost of $534,800. The cash flows over the four-year life of the investment are projected to be $2

14,850, $231,450, $198,110, and $146,820. If the discount rate is zero, what is the NPV? (Omit $ sign in your response.) NPV
Business
1 answer:
ale4655 [162]3 years ago
5 0

<u>Solution and Explanation:</u>

(a)-<u>NPV if the Discount Rate is Zero </u>

If the Discount Rate is Zero, the NPV of the Project is the sum of the Future cash flows deducted by Initial Investment

Net Present Value (NPV) =-\$ 534,800+\$ 214,850+\$ 231,450+\$ 198,110+\$ 146,820

= $256,430

If the Discount Rate is Zero, The NPV will be $256,430”

(b)-<u> NPV If the discount rate is infinite </u>

If the Discount Rate is Infinite, the NPV of the Project is the Initial Investment

NPV = -$534,800 (Negative)

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