You have an investment opportunity in the United Kingdom that requires investment of $500,000 today and will produce a cash flow of 320,000 euros and one year with no risk. Suppose the risk free rate of interest in the UK is 6% and the current competitive exchange rate is one point 70 per euro. What is the NPV of this project? Would you take the project?
Carol Smith has been offered the following deal: An accounting firm would like to retain her for an upfront payment of $50,000. In return, for the next year, the firm would have access to 8 hours of her time every month. Smith’s rate is $550 per hour and her opportunity cost of capital is 15%. Evaluate what IRR and NPV rules advise regarding this opportunity.
Big Steve’s, maker of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $19,000 per year for 8 years.
What is the project’s NPV using a discount rate of 8 percent? Should the project be accepted? Why or why not?
What is the project’s NPV using a discount rate of 17 percent? Should the project be accepted? Why or why not?
What is this project’s internal rate of return? Should the project be accepted? Why or why not?