A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project?
A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project?
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 20P
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A new computer system will require an initial outlay of $15,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 8 percent? What if it is 13 percent? How high can the discount rate be before you would reject the project?
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