If you insulate your office for $1,000, you will save $100 a year in heating exp

Question

If you insulate your office for $1,000, you will save $100 a year in heating expenses. These savings will last forever. what is the NPV of the investment when the cost of capital is 8%? (Round your answer to the nearest cent) a. NPV $ What is the NPV of the investment when the cost of capital is 10%? (Round your answer to the nearest cent NPV $ b. What is the IRR of the investment? (Round your answer to 2 decimal places.) IRR c. What is the payback period on this investment? (Round your answer to 2 decimal places.) Payback period years What is the discounted payback period on this investment when the cost of capital is 8%? (Round your answer to2 decimal places. If there is no finite discounted payback period, enter "O" as the answer to the question.) d. Discounted payback period years

Explanation / Answer

a.

NPV of the investment at 8%=-1000+100/8%=250

NPV of the investment at 10%=-1000+100/10%=0

b.

IRR of the investment is when NPV=0

NPV=0

-1000+100/r=0

r=100/1000=10% is answer

c.

payback period=1000/100=10.00 years

d.

Discounted payback period=20+(18.19/19.87)=20.92 years

the above is the answer

Year CF Discounted CF Cumulative CF 0 -1000 -1000.00 -1000.00 1 100 92.59 -907.41 2 100 85.73 -821.67 3 100 79.38 -742.29 4 100 73.50 -668.79 5 100 68.06 -600.73 6 100 63.02 -537.71 7 100 58.35 -479.36 8 100 54.03 -425.34 9 100 50.02 -375.31 10 100 46.32 -328.99 11 100 42.89 -286.10 12 100 39.71 -246.39 13 100 36.77 -209.62 14 100 34.05 -175.58 15 100 31.52 -144.05 16 100 29.19 -114.86 17 100 27.03 -87.84 18 100 25.02 -62.81 19 100 23.17 -39.64 20 100 21.45 -18.19 21 100 19.87 1.68

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.