Question #117927

Evaluate the following project with the help of ERR for external

reinvestment rate 20% per year and MARR 18% per year. 7

Initial investment =Rs. 4,000,000

Expected life =8 Years

Salvage value =Rs. 50,000

Annual expenses =Rs. 160,000

Annual revenue =Rs. 320,000

reinvestment rate 20% per year and MARR 18% per year. 7

Initial investment =Rs. 4,000,000

Expected life =8 Years

Salvage value =Rs. 50,000

Annual expenses =Rs. 160,000

Annual revenue =Rs. 320,000

Expert's answer

"NPV1=-4,000,000+\\frac{320,000-160,000}{1+0.2}+\\frac{160,000}{(1+0.2)^2}+\\frac{160,000}{(1+0.2)^3}+\\frac{160,000}{(1+0.2)^4}+\\frac{160,000}{(1+0.2)^5}+\\frac{160,000}{(1+0.2)^6}+\\frac{160,000}{(1+0.2)^7}+\\frac{160,000-50,000}{(1+0.2)^8}=-3,397,682.83"

"NPV2=4,000,000*(\\frac{1.18}{1.2})^8=3,496,762.06"

"NPV1=3,397,682.83"

"NPV2=3,496,762.06"

"NPV1<NPV2" project is not effective

Learn more about our help with Assignments: Finance

## Comments

## Leave a comment