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
causes of monopoly

Regardless of the market structure, oligopolist and the monopolist maximize their TR when MR=0. Do you agree?

"price makers" never want to produce in the inelastic part of their demand curve why



Suppose scientists discover that eating soybeans prevents cancer and heart disease



demand for two market are P1=15-Q1&P2=25-Q2.the monopoly TC is C=5+3(Q1+Q2).What are ,output,profit&MR if the monopolist can price disc? riminate

negative slope on ppf represents what?