a.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=540/1.055+1620/1.055^2+10800/1.055^10
=8289.99
NPV=Present value of inflows-Present value of outflows
=8289.99-10800
=-2510.01(Approx)(Negative)
Hence since NPV is negative;opportunity must not be taken
b.Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=540/1.015+1620/1.015^2+10800/1.015^10
=11410.5
NPV=Present value of inflows-Present value of outflows
=11410.5-10800
=610.5(Approx)
Hence since NPV is positive;opportunity must be taken.
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