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Exercise Algo Net Present Value Analysis and Simple Rate of Return LO L
Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on
investment ROI which has been above each of the last three years. Derrick is considering a capital budgeting project requiring a
$ investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is The
project would provide net operating income each year for five years as follows:
Click here to view Exhlblt B and Exhlblt B to determine the appropriate discount factors using tables.
Required:
Compute the project's net present value.
Compute the project's simple rate of return.
a Would the company want Derrick to pursue this investment opportunity?
b Would Derrick be inclined to pursue this investment opportunity?
Answer is not complete.
Complete this question by entering your answers in the tabs below.
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Required A
Required B
Compute the project's net present value.
Note: Round your final answer to the nearest whole dollar amount.
