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    NPV and IRR: Calculate the highest discount rate before rejecting the project

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    NPV and IRR. A project that costs $3,000 to install will provide annual cash flows of $800 for each of the next 6 years. Is this project worth pursuing if the discount rate is 10 percent? How high can the discount rate be before you would reject the project?

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    Solution Preview

    In this question, we must first calculate the present value of this
    project if the discount rate is 10%. The present value would be:

    PV = -3000 + 800/1.1 + 800/1.1^2 + 800/1.1^3 + 800/1.1^4 + 800/1.1^5 + 800/1.1^6

    Using the formula mentioned in the link under the title of
    "Calculating the Present Value of an Ordinary ...

    Solution Summary

    With adequate calculations displayed, the reponse demonstrates how to arrive at the answers to the questions.