If you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 4%? 10%? b. What is the IRR of the investment? (Enter your answer as a whole percent.) c. What is the payback period on this investment?
If you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These savings will last forever. a. What is the NPV of the investment when the cost of capital is 4%? 10%? b. What is the IRR of the investment? (Enter your answer as a whole percent.) c. What is the payback period on this investment?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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If you insulate your office for $18,000, you will save $1,800 a year in heating expenses. These savings will last forever.
a. What is the
b. What is the
c. What is the payback period on this investment?
Expert Solution
Step 1
Formula:
NPV = Present values of cash inflows - Present values of cash outflows.
Deduction of present values of cash outflows from Present value of cash inflows derives the NPV.
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