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5. You are considering an investment for which you require a 14 percent rate of return. The investment costs $58,900 and will
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Answer #1

Desired Rate of Return = 14%

Investment Cost = $58900

Life = 3 Years

Cash Inflow over the life = $25000

Present value of Cash Inflow from the project = PVIFA(14%,3)*25000

= [((1.14)3-1)/((1.14)3*.14)]*25000

= [(1.4815-1)/(1.4815*.14)]*25000

= [.4815/.2074]*25000

= 2.3216*25000

= $58040

Since the Present Value of Cash Inflow from the project is lower than the Initial Cost of the Project, the project shall be rejected

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