Author Question: A firm must spend 10 million today on a project that is expected to bring in annual revenues of 1.5 ... (Read 42 times)

sabina · **on:** Jul 1, 2018

A firm must spend 10 million today on a project that is expected to bring in annual revenues of 1.5 million for the next 10 years (beginning at the end of year 1).

a. If the firm's cost of capital is 5, what is the NPV of this project?
b. If the firm's cost of capital is 10, what is the NPV of this project?
c. What is the internal rate of return?

Question 2

The North American Free Trade Agreement is an example of

A) a beggar-thy-neighbor trade policy.
B) a preferential trade arrangement.
C) a multinational quota system.
D) a general agreement on tariffs and trade.

mbcrismon · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

a. Present value of the revenues = 11.58 million, so NPV = 1.58 million.
b. Present value of the revenues = 9.22 million, so NPV = -0.78 million.
c. 8.15

Answer to Question 2

B