A project that costs $3000.00 to install will provide annual cash flows of $800.00 for each of the next 6 years. Is this project worth pursuing if the discount rate is 10%? How high can the discount rate be before you would reject the project?© BrainMass Inc. brainmass.com March 4, 2021, 6:23 pm ad1c9bdddf
Present value of annual cash flow of $800.00 for 6 years
is obtained by multiplying the annual cash flow by Present Value factor for an annuity PVIFA
n= 6 years
PVIFA (6 periods, 10.% rate=) 4.355261
Therefore Present ...
The solution evaluates if project worth pursuing if the discount rate is 10% using NPV and determines how high can the discount rate be before the project is rejected.