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A ) For a rate of return of 15%, calculate the net present value (NPV), THEN Calculate the present value ratio (PVR) AND Calculate the benefit-cost (B-C) ratio B) Is this project economically satisfactory, why?

A ) For a rate of return of 15%, calculate the net present value (NPV), THEN Calculate the present value ratio (PVR) AND Calculate the benefit-cost (B-C) ratio B) Is this project economically satisfactory, why?

Essentials Of Investments
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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An investment project will involve spending $300,000 at time zero and $450,000 at the end of year one. These investments will generate gross revenues of $420,000 at the end of year one and $660,000 at the end of each year two through eight. A royalty of $42,000 in year one and $66,000 in year two through eight will be incurred along with operating costs of $250,000 in year one and $350,000 at the end of each year two through eight. Calculate the project before-tax cash flow for each year. A) For a rate of return of 15%, calculate the net present value (NPV), THEN Calculate the present value ratio (PVR) AND Calculate the benefit-cost (B-C) ratio B) Is this project economically satisfactory, why?
Transcribed Image Text:An investment project will involve spending $300,000 at time zero and $450,000 at the end of year one. These investments will generate gross revenues of $420,000 at the end of year one and $660,000 at the end of each year two through eight. A royalty of $42,000 in year one and $66,000 in year two through eight will be incurred along with operating costs of $250,000 in year one and $350,000 at the end of each year two through eight. Calculate the project before-tax cash flow for each year. A) For a rate of return of 15%, calculate the net present value (NPV), THEN Calculate the present value ratio (PVR) AND Calculate the benefit-cost (B-C) ratio B) Is this project economically satisfactory, why?
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