Calculate the PV of a project with estimated costs of $350,000 now and $70,000 per year for 5 years beginning 1 year from now with increases of 12% per year thereafter for the next 8 years. Use a real interest rate of 15% per year to make the calculations (a) without an adjustment for inflation and (b) considering inflation at a rate of 8% per year. Draw a cash flow diagram and depict the cash flows in year 6 and year 13 from the start.

Calculate the PV of a project with estimated costs of $350,000 now and $70,000 per year for 5 years beginning 1 year from now with increases of 12% per year thereafter for the next 8 years. Use a real interest rate of 15% per year to make the calculations (a) without an adjustment for inflation and (b) considering inflation at a rate of 8% per year. Draw a cash flow diagram and depict the cash flows in year 6 and year 13 from the start.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 4BE: Internal rate of return A project is estimated to cost 463,565 and provide annual net cash flows of...

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