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You have just been offered a contract worth 1.21 million per year for 5 years. however,...

You have just been offered a contract worth 1.21 million per year for 5 years. however, to take the contract, you will need to purchase some new equipment. your discount rate for this project is 12.2. you are still negotiating the purchase price of the equipment. what is the most you can pay for the equipment and still have a positive NPV?

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Answer #1

The most you can pay for the equipment is the present value of the future cash flows that will occur:-

=PV(rate,nper,pmt)

=PV(12.2%,5,1.21)

=4.34

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