Suppose you are considering a project has an initial cost of $500 that has an ongoing benefit of $250. Further, there is an ongoing cost that is equal to $90, which increases by 10% each year (compounding). Assume the project lasts 6 years. If the appropriate discount rate is 6%. Calculate: a) the Net Present Value = $Blank 1 b) the Benefit Cost Ratio = Blank 2 c) should the project be accepted or rejected? Explain your answer using the information from part a) and b). Answer =Blank 3 (accept/reject) Provide your answers to two decimal places. Do not include any commas (,) "$" or "%" in your answers. Ensure you show all your working in your spreadsheet.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 13P
Question
Suppose you are considering a project has an initial cost of $500 that has an ongoing benefit of $250. Further, there is an ongoing
cost that is equal to $90, which increases by 10% each year (compounding). Assume the project lasts 6 years.
If the appropriate discount rate is 6%. Calculate:
a) the Net Present Value = $Blank 1
b) the Benefit Cost Ratio = Blank 2
c) should the project be accepted or rejected? Explain your answer using the information from part a) and b). Answer =Blank 3
(accept/reject)
Provide your answers to two decimal places. Do not include any commas (,) "$" or "%" in your answers. Ensure you show all your
working in your spreadsheet.
Transcribed Image Text:Suppose you are considering a project has an initial cost of $500 that has an ongoing benefit of $250. Further, there is an ongoing cost that is equal to $90, which increases by 10% each year (compounding). Assume the project lasts 6 years. If the appropriate discount rate is 6%. Calculate: a) the Net Present Value = $Blank 1 b) the Benefit Cost Ratio = Blank 2 c) should the project be accepted or rejected? Explain your answer using the information from part a) and b). Answer =Blank 3 (accept/reject) Provide your answers to two decimal places. Do not include any commas (,) "$" or "%" in your answers. Ensure you show all your working in your spreadsheet.
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