The project analyst of Carbon Company is considering the purchase of a new computer mainframe for P5 million. The analysis reveals that the new mainframe should bring in additional after-tax cash flows of P850,000, measured in real pesos during the next ten years. The real interest rate is 10% and the inflation rate is 5% or a nominal rate of 15.50% Using nominal cash flows (i.e., annual cash flows cumulatively increased by 5% every year) and nominal rate of 15.50%, how much net present value is expected from the project? a. P166,552 b. P222,882 c. P182,406 d. P151,878
The project analyst of Carbon Company is considering the purchase of a new computer mainframe for P5 million. The analysis reveals that the new mainframe should bring in additional after-tax cash flows of P850,000, measured in real pesos during the next ten years. The real interest rate is 10% and the inflation rate is 5% or a nominal rate of 15.50% Using nominal cash flows (i.e., annual cash flows cumulatively increased by 5% every year) and nominal rate of 15.50%, how much net present value is expected from the project? a. P166,552 b. P222,882 c. P182,406 d. P151,878
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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The project analyst of Carbon Company is considering the purchase of a new computer mainframe for P5 million. The analysis reveals that the new mainframe should bring in additional after-tax cash flows of P850,000, measured in real pesos during the next ten years.
The real interest rate is 10% and the inflation rate is 5% or a nominal rate of 15.50%
Using nominal cash flows (i.e., annual cash flows cumulatively increased by 5% every year) and nominal rate of 15.50%, how much
a. P166,552
b. P222,882
c. P182,406
d. P151,878
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