Find the NPV=RTc-C
1. Our event management company has the opportunity to purchase a large tent for only $15,000. We believe that, over the next 5 years, having the tent will increase our annual profits by $3,250. We also have the opportunity to use that same $15,000 to invest in another project that will most likely produce a 6% return on the investment. From a purely financial perspective, should we purchase the tent?
2. An energy efficiency system has been recommended for our Wedding Reception Center. It will cost $7,000 to purchase and install. The system will be obsolete in approximately 5 years, but will help us to realize utility bill savings of $3,000 in the first year, $2,000 in the second year, $1,500 in the third year, $1,000 in the fourth year, and $500 in the final year. Other investment options at the same level of risk (7%) are also available. Should we invest in the energy efficiency system?
4. For how many years would a $350,000 investment need to yield $37,635 annual cash flows in order to realize a 6% IRR?
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