Opportunity cost | 20% | |
Descp. | Dates | cashflow |
Initial investment with charges | Jan-00 | (120,000) |
Cost saving + Insurance exp | Jan-00 | 25,000 |
Cost saving + Insurance exp | Jan-01 | 25,000 |
Cost saving + Insurance exp | Jan-02 | 25,000 |
Cost saving + Insurance exp | Jan-03 | 25,000 |
Cost saving + Insurance exp + Salvage value | Jan-04 | 40,000 |
IRR | 7.5% | |
XNPV | (23,083.8) | |
If 20% is the opportunity cost is assumed then the IRR of the project is @ 7.5% which is significantly low,
Therefore, company should not be investing in this project
Note=all the formulas are used in excel to arrive at the number
2. A project requires an initial investment of $100,000 and installation cost of $20,000. The financial...
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