If you insulate your office for $10,000, you will save $1,000 a year in heating expenses. These savings will last forever.
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a. What is the NPV of the investment when the cost of capital is 8%? 10%?
NPV = PV of inflows - initial investment
The inflows are a perpetuity and so the present value is given ...
The solution explains the calculation of NPV, IRR and payback