percent per year, 2. how much would they have today? The same company has an investment project that would cost $25 million today and yield a payoff of $30 million in 3 years. Should the firm undertake the project if the interest rate is 8 percent? 6 percent ? Can you figure out the exact cutoff for the interest rate between profitability and non profitability? 3. The same company has an investment project that would cost $25 million today how many years will take to yield a payoff of $30 million with 9.5%?

percent per year, 2. how much would they have today? The same company has an investment project that would cost $25 million today and yield a payoff of $30 million in 3 years. Should the firm undertake the project if the interest rate is 8 percent? 6 percent ? Can you figure out the exact cutoff for the interest rate between profitability and non profitability? 3. The same company has an investment project that would cost $25 million today how many years will take to yield a payoff of $30 million with 9.5%?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A company in real estate sold a house about 200 years ago for $20. If they had invested this amount at an interest rate of 10
percent per year, 2. how much would they have today? The same company has an investment project that would cost $25
million today and yield a payoff of $30 million in 3 years. Should the firm undertake the project if the interest rate is 8
percent? 6 percent ? Can you figure out the exact cutoff for the interest rate between profitability and non profitability? 3.
The same company has an investment project that would cost $25 million today how many years will take to yield a payoff
of $30 million with 9.5%?

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Step 1: Introduce the concept of present value.

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Step 2: Determine how much money would company have if they had invested 20 at an interest rate of 10.

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Step 3: Determine if the firm should undertake the project.

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Step 4: Calculate the exact cutoff for the interest rate.

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Step 5: Determine how many years it will take for an investment project.

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