Compute the NPV of an investment with CFo=-$50 000 and CF, = +$12 000 (j= 1,...,6) if the annual interest rate, compounded annually, is (a) 8%, (b) 10%, (c) 12%, (d) 15%. (e) Interpret the results. Ans. (a) $5473.37; (b) $2262.53; (c) -$663.98; (d) -$4586.74. (e) The investment is not economically acceptable when the interest rate is 12% or greater, in which case the presentworth of the cash flows is less than the (present worth of the) investment.

Compute the NPV of an investment with CFo=-$50 000 and CF, = +$12 000 (j= 1,...,6) if the annual interest rate, compounded annually, is (a) 8%, (b) 10%, (c) 12%, (d) 15%. (e) Interpret the results. Ans. (a) $5473.37; (b) $2262.53; (c) -$663.98; (d) -$4586.74. (e) The investment is not economically acceptable when the interest rate is 12% or greater, in which case the presentworth of the cash flows is less than the (present worth of the) investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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