The firm plans to use a 12% cost of capital to evaluate each computer. Computer A: Initial outlay=50,000, cash inflow=7,000 for 6 years Computer B: Initial outlay=35,000 cash inflow=5,500 for year 1, 12,000 for year 2, 16,000 for year 3, 23,000 for year 4 Computer C: Initial outlay=60,000, cash inflow=18,000 for 5 years a) calculate the NPV for each computer over its life. b) find the equivalent annual cost for each computer over its life.
The firm plans to use a 12% cost of capital to evaluate each computer. Computer A: Initial outlay=50,000, cash inflow=7,000 for 6 years Computer B: Initial outlay=35,000 cash inflow=5,500 for year 1, 12,000 for year 2, 16,000 for year 3, 23,000 for year 4 Computer C: Initial outlay=60,000, cash inflow=18,000 for 5 years a) calculate the NPV for each computer over its life. b) find the equivalent annual cost for each computer over its life.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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The firm plans to use a 12% cost of capital to evaluate each computer.
Computer A: Initial outlay=50,000,
Computer B: Initial outlay=35,000 cash inflow=5,500 for year 1, 12,000 for year 2, 16,000 for year 3, 23,000 for year 4
Computer C: Initial outlay=60,000, cash inflow=18,000 for 5 years
a) calculate the NPV for each computer over its life.
b) find the equivalent annual cost for each computer over its life.
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