The project will require an immediate cash outlay of $100 million up front. The US Postal Service is tax exempt. Computer access recommended.
Required:
The United States Postal Service is considering investing in automatic postal machines that charge credit or debit cards for the postage due on parcels. The following cash flow savings are expected:

(1) Calculate the net present value assuming a discount rate of 11 percent.
(2) Calculate the net present value assuming a discount rate of 15 percent.
(3) Would changing the discount rate from 12 to 14 percent likely change the US Postal Services' decision to adopt the new machines or not?

Question

The project will require an immediate cash outlay of $100 million up front. The US Postal Service is tax exempt. Computer access recommended.
Required:
 The United States Postal Service is considering investing in automatic postal machines that charge credit or debit cards for the postage due on parcels. The following cash flow savings are expected:
 
(1) Calculate the net present value assuming a discount rate of 11 percent.
(2) Calculate the net present value assuming a discount rate of 15 percent.
(3) Would changing the discount rate from 12 to 14 percent likely change the US Postal Services' decision to adopt the new machines or not?

Quizplus · Accepted Answer

The Answer of The project will require an immediate cash outlay of $100 million up front. The US Postal Service is tax exempt. Computer access recommended.
Required:
 The United States Postal Service is considering investing in automatic postal machines that charge credit or debit cards for the postage due on parcels. The following cash flow savings are expected:
 
(1) Calculate the net present value assuming a discount rate of 11 percent.
(2) Calculate the net present value assuming a discount rate of 15 percent.
(3) Would changing the discount rate from 12 to 14 percent likely change the US Postal Services' decision to adopt the new machines or not?

The Project Will Require an Immediate Cash Outlay of $100