Solve the following problem. Consider a potential investment opportunity in a project which has a total life of 5 years. The capital cost/investment needed is 100,000 USD. The annual expenses (O&M) are 10,000 USD/year whereas the annual revenue is 20,000 USD. The end-of-service price of the asset is 70,000 USD. Using the NPV method and considering the annual interest rate of 10%, evaluate if the opportunity is good enough to be invested in. Please explain your decision. NPV = n Χι (1+r)' =0

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
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Solve the following problem.
Consider a potential investment opportunity in a project which has a total life of 5 years. The
capital cost/investment needed is 100,000 USD. The annual expenses (O&M) are 10,000
USD/year whereas the annual revenue is 20,000 USD. The end-of-service price of the asset is
70,000 USD. Using the NPV method and considering the annual interest rate of 10%,
evaluate if the opportunity is good enough to be invested in. Please explain your decision.
NPV =
n
Χι
(1+r)'
=0
Transcribed Image Text:Solve the following problem. Consider a potential investment opportunity in a project which has a total life of 5 years. The capital cost/investment needed is 100,000 USD. The annual expenses (O&M) are 10,000 USD/year whereas the annual revenue is 20,000 USD. The end-of-service price of the asset is 70,000 USD. Using the NPV method and considering the annual interest rate of 10%, evaluate if the opportunity is good enough to be invested in. Please explain your decision. NPV = n Χι (1+r)' =0
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