As entrepreneur is considering raising a bank loan to buy a firm year life span machine costing two millions(2,000,000) the cost of dept is 15% per annum and the machine will have no salvage value at the end of its life span. If the operation from the machine will yield the following annual cash flows. Year 1= #490000 Year 2=#420000 Year 3=#340000 Year 4=#400000 Year 5=#380000 Determine weather or not the manager should implement the project on the basis of 1. Net Present Value (NPV). 2. Profitability Index (PI). 3. Internal Rate if Return (IRR).
As entrepreneur is considering raising a bank loan to buy a firm year life span machine costing two millions(2,000,000) the cost of dept is 15% per annum and the machine will have no salvage value at the end of its life span. If the operation from the machine will yield the following annual cash flows. Year 1= #490000 Year 2=#420000 Year 3=#340000 Year 4=#400000 Year 5=#380000 Determine weather or not the manager should implement the project on the basis of 1. Net Present Value (NPV). 2. Profitability Index (PI). 3. Internal Rate if Return (IRR).
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
Problem 1PS
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As entrepreneur is considering raising a bank loan to buy a firm year life span machine costing two millions(2,000,000) the cost of dept is 15% per annum and the machine will have no salvage value at the end of its life span. If the operation from the machine will yield the following annual cash flows.
Year 1= #490000
Year 2=#420000
Year 3=#340000
Year 4=#400000
Year 5=#380000
Determine weather or not the manager should implement the project on the basis of
1. Net Present Value (NPV).
2. Profitability Index (PI).
3. Internal Rate if Return (IRR ).
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