Determine the net present value, Microeconomics

Assignment Help:

A potential investment project has the following stream of annual social (benefits minus costs), where you may assume the project starts with the capital payment of $12,000 on Day 1, with net benefits accruing on each anniversary of that date:

(a)  Define what is meant by the project's Net Present Value and determine this NPV using a 4% annual rate of discount and also using a 10% annual discount rate.

(b) Without calculating them, what can one infer about the value of the Internal Rate of Return (IRR) and the Benefit-Cost Ratio associated with this project? 

(c) Provide a labeled graph that shows NPV (vertical axis) as a function of discount rate (horizontal axis).  Important points to identify on your graph include

(i) NPV (0),

(ii) NPV (0.04),

(iii) NPV (0.10),

(iv) NPV (∞), and

(v) The IRR [there is no need to estimate or solve for the specific value of the IRR, but you should identify it in your graph.] 

(d) If the discount rate rose to 15% per year, how would this change the IRR and the Benefit-Cost Ratio?


Related Discussions:- Determine the net present value

What is economic theory, What is Economic Theory? An economic theory th...

What is Economic Theory? An economic theory that can be considered an axiomatic approach comprise a set of assumptions and circumstances, an analytical framework and explanatio

State about the prices - price level, State about the prices - Price level ...

State about the prices - Price level Prices are of great significance in macroeconomics as indeed they are in microeconomics. Though, in microeconomics we are more interested i

Summary of educational planning and economic growth, Summary of Educational...

Summary of Educational Planning and Economic Growth An economy with scarce resources and enormous needs and aspirations requires planning. This is true of the education sector

Law of diminishing marginal utility, law of diminishing marginal utility it...

law of diminishing marginal utility its assumptions, limitation, and its practical importance

Marginal Cost, why raise MC cost after minimum level ?

why raise MC cost after minimum level ?

Market structure, how do oligopolistic market and monopolistic competition ...

how do oligopolistic market and monopolistic competition react to change in demand and supply ?

#Demand and supply equations, Ask question # how do you formulate a demand ...

Ask question # how do you formulate a demand and supply equations when you a table of prices, quantity demanded and supplied?

International econonics, Strictly give the diff. btw the theory of reciproc...

Strictly give the diff. btw the theory of reciprocal demand & theory of comparative advantage

What is Economic Entity Assumption , The accountants keep all the business ...

The accountants keep all the business transactions and records of a sole proprietorship separate from the business owner''s personal transactions and For legal purposes a sole prop

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd