Determine the net present value, Microeconomics

A potential investment project has the following stream of annual social (benefits minus costs), where you may assume the project starts with the capital payment of $12,000 on Day 1, with net benefits accruing on each anniversary of that date:

(a)  Define what is meant by the project's Net Present Value and determine this NPV using a 4% annual rate of discount and also using a 10% annual discount rate.

(b) Without calculating them, what can one infer about the value of the Internal Rate of Return (IRR) and the Benefit-Cost Ratio associated with this project? 

(c) Provide a labeled graph that shows NPV (vertical axis) as a function of discount rate (horizontal axis).  Important points to identify on your graph include

(i) NPV (0),

(ii) NPV (0.04),

(iii) NPV (0.10),

(iv) NPV (∞), and

(v) The IRR [there is no need to estimate or solve for the specific value of the IRR, but you should identify it in your graph.] 

(d) If the discount rate rose to 15% per year, how would this change the IRR and the Benefit-Cost Ratio?

Posted Date: 2/19/2013 2:16:02 AM | Location : United States







Related Discussions:- Determine the net present value, Assignment Help, Ask Question on Determine the net present value, Get Answer, Expert's Help, Determine the net present value Discussions

Write discussion on Determine the net present value
Your posts are moderated
Related Questions
What caused the productivity slowdown?  Observers have pointed to 4 factors--Oil prices, baby boom, increased problems of economic measurement and environmental protection expe

Derived demand and Demand schedule: D erived demand is where the demand for a final product leads to the demand for a second product which is used to produce this final p

Cost in the Short Run Marginal Cost (or MC) is the cost of expanding output by one unit.  As fixed costs have no impact on marginal cost, it can be given as: Average Total

i) Two firms, A and B, are operating in a UK textile industry under duopolistic condition and choose to either produce at "High" price or a "Low" price. Suppose you are the man

1) What are the most important challenges that economists try to address? (2) What is the role of government in a market based economy?  (3) Who are the main economic players

If producers expect future prices to enhance, current supply will decline in favor of selling inventories at higher prices later.  In other words, supply will reduce (a shift to th


i want an application on indifference curve of a specific firm? can i get it easily?

Wage Differentials: Market structure alone does not account for all of the differences in wages and employment. Market wage differentials arise from various other sources, includin

After I figure a table what do I do with it? I have no book and no study materials to answer my question