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Net present value of the investment

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An investment that costs $60,000 will return $25,000 per year for five years. Determine the net present value of the investment if the required rate of return is 14 percent. (Ignore taxes.) Should the investment be undertaken?

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Solution Preview

NPV = PV of cash flows - initial investment
Cash flows are in the form of annuity. We use ...

Solution Summary

The solution explains how to calculate the net present value of the investment and make the accept/reject decision.

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