Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=$6000[1-(1.16)^-10]/0.16
=$6000*4.833227478
=$28,999.36
NPV=Present value of inflows-Present value of outflows
=$28,999.36-$35000
=($6000.64)(Approx)(Negative).
Hence since NPV is negative;project must be rejected.
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