Big Stevie\'s is the maker of swizzle sticks, they are considering the purchase
ID: 2640401 • Letter: B
Question
Big Stevie's is the maker of swizzle sticks, they are considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $21,000 a year for 9 years. A. What is the projects NPV using a discount rate of 9%? Should project be accepted? Why or why not. B. . What is the projects NPV using a discount rate of 14%? Should project be accepted? Why or why not. C. What is this projects internal rate of return? Should it be accepted? Why or why not. Big Stevie's is the maker of swizzle sticks, they are considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $21,000 a year for 9 years. A. What is the projects NPV using a discount rate of 9%? Should project be accepted? Why or why not. B. . What is the projects NPV using a discount rate of 14%? Should project be accepted? Why or why not. C. What is this projects internal rate of return? Should it be accepted? Why or why not. A. What is the projects NPV using a discount rate of 9%? Should project be accepted? Why or why not. B. . What is the projects NPV using a discount rate of 14%? Should project be accepted? Why or why not. C. What is this projects internal rate of return? Should it be accepted? Why or why not.Explanation / Answer
1) Calculating the NPV of the project when the discount rate is 9%:
The formula to calculate NPV = -CF0 + CF1/(1 + r)1 +
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