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NPV and maximum return: A firm can purchase new equipment for a ?$21,000 initial investment. The...

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Finance

NPV and maximum return: A firm can purchase new equipment for a?$21,000 initial investment. The equipment generates an annual?after-tax cash inflow of $8,000 for 55 years.

a. Determine the net present value (NPV?) of the? asset,assuming that the firm has a cost of capital of 12?%. Is theproject? acceptable?

b. Determine the maximum required rate of return that the firmcan have and still accept the asset.

Please show and explain work!

Answer & Explanation Solved by verified expert
3.7 Ratings (668 Votes)
Net Present ValueNPV Present value of cash    See Answer
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Transcribed Image Text

NPV and maximum return: A firm can purchase new equipment for a?$21,000 initial investment. The equipment generates an annual?after-tax cash inflow of $8,000 for 55 years.a. Determine the net present value (NPV?) of the? asset,assuming that the firm has a cost of capital of 12?%. Is theproject? acceptable?b. Determine the maximum required rate of return that the firmcan have and still accept the asset.Please show and explain work!

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