Total interest paid on a 30-year straight note was $230,000 during the term of the loan. The annual interest rate was 6.6%. What
1 answer:
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Answer:
≅40.5 years
Time for Both countries have same Real GDP per capita is 40.467 years≅40.5 Years
Explanation:
In case of US:
Present Value=$56,000
Increase=r=1.5%=0.015
Future GDP=
where:
t is time
Future GDP=
In case of China:
Present Value=$8,000
Increase=r=6.5%=0.065
Future GDP=
where:
t is time
Future GDP=
We have to find time t when both countries have same future GDP:
=
Dividing equation by 8000:
Taking Natural log (ln) on both sides:
Time for Both countries have same Real GDP per capita is 40.467 years≅40.5 Years
A) The company should not invest in the provided project due to the negative NPV of the project.
B) The NPV of the project comes out to be (286).
<h3>What is NPV?</h3>NPV is an abbreviated form of Net present value and computed by deducting the cash outflows from cash inflows at the present value.
Given values:
Cash flow of year 1: $10,000
Cash flow of year 2: $10,000
Cash flow of year 3: $2,000
Cash outflow (cost of investment) =$20,000
Step-1 Computation of PV of cash inflows of every year:
PV of year 1 = Cash inflow of year 1 / (1+ interest rate)^ 1
= $10,000 / (1+0.07) ^ 1
= $10,000 X 0.934579
= $9,346
PV of year 2 = Cash inflow of year 1 / (1+ interest rate)^ 2
= $10,000 / (1+0.07) ^ 2
= $10,000 X 0.873438
= $8,735
PV of year 3= Cash inflow of year 1 / (1+ interest rate)^ 3
= $2,000 / (1+0.07) ^ 2
= $2,000 X 0.816297
=$1,633
Step-2 Computation of total amount of PV of cash inflows:
Step-3 Computation of NPV:
Therefore, the NPV comes out to be a negative amount of 286, and hence, the company should not accept the project.
Learn more about the net present value in the related link:
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