You are the owner of a large data-services firm and are deciding on the purchase of a new hardwarecooling system that you expect will yield $233,300 in cost-savings per year for the next 15 years. Theinstallation of this cooling system will cost $3,000,000. Additionally, O&M expenditures for the collingsystem are expected to be $2,120 per year. use excel to solve 1. At face value, does this system seem profitable? By how much?2. Assume that your company uses a discount rate of 6%.a. What is the Net Present Value (NPV) of this project?b. How does the NPV of this project change as you assume a higher or lower discountrate? Why?
You are the owner of a large data-services firm and are deciding on the purchase of a new hardwarecooling system that you expect will yield $233,300 in cost-savings per year for the next 15 years. Theinstallation of this cooling system will cost $3,000,000. Additionally, O&M expenditures for the collingsystem are expected to be $2,120 per year. use excel to solve 1. At face value, does this system seem profitable? By how much?2. Assume that your company uses a discount rate of 6%.a. What is the Net Present Value (NPV) of this project?b. How does the NPV of this project change as you assume a higher or lower discountrate? Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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You are the owner of a large data-services firm and are deciding on the purchase of a new hardware
cooling system that you expect will yield $233,300 in cost-savings per year for the next 15 years. The
installation of this cooling system will cost $3,000,000. Additionally, O&M expenditures for the colling
system are expected to be $2,120 per year. use excel to solve
1. At face value, does this system seem profitable? By how much?
2. Assume that your company uses a discount rate of 6%.
a. What is the
b. How does the NPV of this project change as you assume a higher or lower discount
rate? Why?
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