The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $308,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was %.
The business plan for Knowlt, LLC, a start-up company that manufactures portable multigas detectors, showed equivalent annual cash flows of $400,000 for the first 5 years. If the cash flow in year 1 was $308,000 and the constant increase thereafter was $50,000 per year, what interest rate was used in the calculation? The interest rate used in the calculation was %.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.21MCE
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Required:
To compute the interest rate used to yield equivalent annual cash flows of $400,000 per year.
Note:
The initial investment has not been considered while computing NPV since this value has not been given in the question.
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