SECTION V: HOW TO DETERMINE WHETHER INVESTMENTS ARE PROFITABLE A publisher is deciding whether or not to invest in a new computer. The computer would cost $900, and would increase the cash flows in Year 1 by $500 and in Year 3 by $800. Cash flows do not change in Year 2. a. If the interest rate is 12%, what is the Net Present Value of the investment? b. Is the investment in the new computer feasible when the interest rate is 12%? Please explain. c. If the interest rate rises to 25% what is the Net Present Value of the investment and would the investment still take place?
SECTION V: HOW TO DETERMINE WHETHER INVESTMENTS ARE PROFITABLE A publisher is deciding whether or not to invest in a new computer. The computer would cost $900, and would increase the cash flows in Year 1 by $500 and in Year 3 by $800. Cash flows do not change in Year 2. a. If the interest rate is 12%, what is the Net Present Value of the investment? b. Is the investment in the new computer feasible when the interest rate is 12%? Please explain. c. If the interest rate rises to 25% what is the Net Present Value of the investment and would the investment still take place?
Database System Concepts
7th Edition
ISBN:9780078022159
Author:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Publisher:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Chapter1: Introduction
Section: Chapter Questions
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Transcribed Image Text:SECTION V: HOW TO DETERMINE WHETHER INVESTMENTS ARE PROFITABLE
A publisher is deciding whether or not to invest in a new computer. The computer would cost $900, and would increase
the cash flows in Year 1 by $500 and in Year 3 by $800. Cash flows do not change in Year 2.
a. If the interest rate is 12%, what is the Net Present Value of the investment?
b. Is the investment in the new computer feasible when the interest rate is 12%? Please explain.
c. If the interest rate rises to 25% what is the Net Present Value of the investment and would the investment still take
place?
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