2) A firm has a project with no investment requirement, but it must raze existing buildings over a 4-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years. The net cash flows are estimated to be as follows: Year End Net Cash Flow 1 $500,000 2 300,000 3 100,000 4 -2,400,000 150,000 6. 200,000 7 250,000 300,000 9. 350,000 10 400,000 Use the ERR method when E= 8% per year to determine a rate of return.

2) A firm has a project with no investment requirement, but it must raze existing buildings over a 4-year period and, at the end of the fourth year, invest $2,400,000 for new construction. It will collect all revenues and pay all costs for a period of 10 years. The net cash flows are estimated to be as follows: Year End Net Cash Flow 1 $500,000 2 300,000 3 100,000 4 -2,400,000 150,000 6. 200,000 7 250,000 300,000 9. 350,000 10 400,000 Use the ERR method when E= 8% per year to determine a rate of return.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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