(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 and will generate net cash inflows of $17,000 per year for 9 years. a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 9 percent, then the project's NPV is $ 8,081. (Round to the nearest dollar.) The project accepted because the NPV is and therefore value to the firm. (Select from the drop-down menus.)
(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 and will generate net cash inflows of $17,000 per year for 9 years. a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not? b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not? c. What is this project's internal rate of return? Should the project be accepted? Why or why not? a. If the discount rate is 9 percent, then the project's NPV is $ 8,081. (Round to the nearest dollar.) The project accepted because the NPV is and therefore value to the firm. (Select from the drop-down menus.)
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
Problem 1PS
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am. 123.
Transcribed Image Text:(Net present value calculation) Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 and will generate net cash inflows of $17,000 per
year for 9 years.
a. What is the project's NPV using a discount rate of 9 percent? Should the project be accepted? Why or why not?
b. What is the project's NPV using a discount rate of 16 percent? Should the project be accepted? Why or why not?
c. What is this project's internal rate of return? Should the project be accepted? Why or why not?
a. If the discount rate is 9 percent, then the project's NPV is $ 8,081. (Round to the nearest dollar.)
The project
accepted because the NPV is
and therefore
value to the firm. (Select from the drop-down menus.)
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