What the discount rate over a payment interval is

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Best Truck Rental is considering two engine development projects. The RRA design has an expected life of four years and projected cash inflows are $36,000 at the end of each of the four years. The RRB design is more flexible and has a four-year life. The projected end-of-year cash flows from the RRB design are $33,000 in each of the four years. The first project (RRA design) requires an initial investment of $90,000 while the second project (RRB design) requires an initial investment of $80,500. Best Truck Rental's cost of capital is 12% p.a. compounded quarterly. What is the NPV of the project with the most value to the company? Answer the following questions, and choose the closest answer from the possible choices following each question:

Question 1: Evaluate the statement: The initial investment of $80,500 for RRB design should be adjusted to a FV in this analysis. (Answer Yes or No)

Question 2: Evaluate the statement: a project should not be undertaken if NPV < 0. (Answer Yes or No)

Question 3: The discount rate over a payment interval in this analysis is

Question 4: For RRA design, which TVM variable on the financial calculator does $36,000 represent?

Question 5: What is the NPV for RRB design?

Reference no: EM132602462

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