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Spending $40,000 on a New Truck Would Increase Delivery Revenues

Question 111

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Spending $40,000 on a new truck would increase delivery revenues by $18,000 annually over the truck's 4-year life.Graph the relationship between NPV and discount rate for this project.Hint: Assume for simplicity that the relationship is linear and find two points on the line's graph.Would you accept this project if the discount rate were 16%?

Correct Answer:

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blured image When discount rate = 0,
NPV = -$40,000 ...

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