A small family business wants to expand and is planning to start an investment, which will cost an initial investment of $50,000. The father is sure that the investment will generate annual cash flows of $11,000 for the next 10 years. In exactly 5 years from now, the machine needs some serious maintenance, which will cost $20,000. At the end of the 10 years, the investment can be sold for $5,000. The MARR (Minimum Attractive Rate of Return) is 12% annual nominal, compounded semi-annually. a) What is the Net Present Value of the investment? b) Should the company accept this investment or not?
A small family business wants to expand and is planning to start an investment, which will cost an initial investment of $50,000. The father is sure that the investment will generate annual cash flows of $11,000 for the next 10 years. In exactly 5 years from now, the machine needs some serious maintenance, which will cost $20,000. At the end of the 10 years, the investment can be sold for $5,000. The MARR (Minimum Attractive Rate of Return) is 12% annual nominal, compounded semi-annually. a) What is the Net Present Value of the investment? b) Should the company accept this investment or not?
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
Section: Chapter Questions
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A small family business wants to expand and is planning to start an investment, which will cost an initial investment of $50,000. The father is sure that the investment will generate annual cash flows of $11,000 for the next 10 years. In exactly 5 years from now, the machine needs some serious maintenance, which will cost $20,000. At the end of the 10 years, the investment can be sold for $5,000. The MARR (Minimum Attractive
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