A new computer system will require an initial outlay of $20,500, but it will increase the firm's cash flows by $4,800 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%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing c. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Maximum discount rate %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Ef 608.

A new computer system will require an initial outlay of $20,500, but it will increase the firm's cash flows by $4,800 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%.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to
2 decimal places.
Net present value
Worth installing
b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to
2 decimal places.
Net present value
Worth installing
c. How high can the discount rate be before you would reject the project?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Maximum discount rate
%
Transcribed Image Text:A new computer system will require an initial outlay of $20,500, but it will increase the firm's cash flows by $4,800 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%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing b. Calculate the NPV and decide if the system is worth installing if the required rate of return is 13%. Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places. Net present value Worth installing c. How high can the discount rate be before you would reject the project? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Maximum discount rate %
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