How does the required rate of return affect the NPV

Reference no: EM131821071

Question: Effect of Required Rate Blanchard Company has an opportunity to invest $15,000 in a new automated lathe that will reduce annual operating costs by $2,300 per year and will have an economic life of 12 years.

1. Suppose Blanchard Company has a required rate of return of 10%. Compute the NPV of the investment and recommend to Blanchard Company whether it should purchase the lathe.

2. Suppose Blanchard Company has a required rate of return of 12%. Compute the NPV of the investment and recommend to Blanchard Company whether it should purchase the lathe.

3. How does the required rate of return affect the NPV of a potential investment?

Reference no: EM131821071

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