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
Define Nash equilibrium and explain with the help of the game ''prisoner''s dilemma''.

The following are AC and TC functions for various firms (i). AC = 140/Q + 20 (ii) AC - a/Q = k (iii) TC - 10 =2Q + 0.1Q 2 (iv) TC - k - βQ = cQ 2 Where a, k, β and

How do you draw the demand curve Q = 100 - 50P and indicate which portion of the curve is elastic, which is enelastic, and which is unit elastic?

Production without capital is hard for us even to imagine. Nature cannot furnish goods and materials to man unless he has the tools and machinery for mining farming forestry fishin

how a capitalist system solves the three fundamental economic problems

sir explain me about all things of microeconomics

Monopoly: Monopoly is a market structure in which there is a single firm producing a commodity or providing a service that has no close substitutes. As the sole supplier to it

If demand goes down what happens to the equilibrium?

Time Value of Money The time value of money is the price or value placed on time. It is commonly thought of as the opportunity cost related with a particular investment. Money

Three factors that determine demand for coffee and tea