Purchase Solution

Determining NPV and Maximum Required Rate of Return

Not what you're looking for?

Ask Custom Question

A firm can purchase a fixed asset for a $13,000 initial investment. The asset generates an annual after-tax cash inflow of $4,000 for 4 years.

a. Determine the net present value (NPV) of the asset, assuming that the firm has a 10% cost of capital. Is the project acceptable?
b. Determine the maximum required rate of return (closest whole-percentage rate) that the firm can have and still accept the asset. Discuss this finding in light of your response in part a.

Purchase this Solution

Solution Summary

The solution examines NPV and the maximum required rate of return for an initial investment of $13,000.

Solution Preview

a. Using financial calculator:

NPV =
CF
13000, +/-, enter, down arrow
4000, enter, down arrow, 4 enter
NPV
10, enter, down arrow,
CPT. Therefore, NPV = ...

Purchase this Solution


Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.