Q10. The equation that will yield the external rate of return (ERR) of the following project i= $25,000 $6,000 Investment Cost Annual Receipts Annual Expenses Market Value $7,000 Expected Life 5 years 8% A. 25,000 (F/P, i%, 5) = 7,000 +6,000 (P/F, 8%, 5) B. 25,000 (F/P, i%, 5) = 7,000 6,000 (P/A, 8%, 5) C. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (F/A, 8%, 5) D. 25,000 (P/F, i%, 5) = 7,000 - 6,000 (F/A, 8%, 5) E. None

Q10. The equation that will yield the external rate of return (ERR) of the following project i= $25,000 $6,000 Investment Cost Annual Receipts Annual Expenses Market Value $7,000 Expected Life 5 years 8% A. 25,000 (F/P, i%, 5) = 7,000 +6,000 (P/F, 8%, 5) B. 25,000 (F/P, i%, 5) = 7,000 6,000 (P/A, 8%, 5) C. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (F/A, 8%, 5) D. 25,000 (P/F, i%, 5) = 7,000 - 6,000 (F/A, 8%, 5) E. None

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 1E: A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash...

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A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent. The firms cost of capital is 12 percent. Compute the IRR and the NPV. Should the firm accept or reject the project?
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