What is the Net Present Value of the project, using an interest rate of 8.0%? Should you undertake the project?, assignment help
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1. a. Yes/No ________: Should your company invest $1,000,000 today in order to return net profit of $1,500,000 five years from now? Discount, using an interest rate of 12.0%. Show your work.
b. Yes/No ________: Should your company invest $1,000,000 today in order to return net profit of $1,500,000 five years from now? Discount, using an interest rate of 6.0%. Show your work.
2. For #1b, what is your decision if there is only an 80% probability of achieving the $1,500,000 five years from now? Show your work.
3. Use the following stream of revenue and expenses for a proposed corporate investment:
Year Expense Revenue
0 $1,000,000
1
2
3 $500,000
4 $700,000
5
6 $100,000
7 $1,700,000
a. What is the Net Present Value of the project, using an interest rate of 8.0%? Should you undertake the project?
b. If all the expenses have a 100% probability of being accurate, but the revenue in Year 4 has a 90% probability and the revenue in Year 7 has an 80% probability, what is the “expected” Net Present Value of the project, using an interest rate of 8.0%? Should you undertake the project?
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