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Question

Consider a project that requires an initial investment of $\$ 102,000$ and will produce a single cash flow of $\$ 153,000$ in five years.

a. What is the NPV of this project if the five-year interest rate is $4.9 \%$ (EAR)?

b. What is the NPV of this project if the five-year interest rate is $9.8 \%$ (EAR)?

c. What is the highest five-year interest rate such that this project is still profitable?

Solution

VerifiedAnswered 1 year ago

Answered 1 year ago

Step 1

1 of 11In this exercise, we are asked to determine the net present value of the investment given different interest rates.

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