BXV, Inc. is considering a 15-year investment project that will cost $300,000. I
ID: 2382250 • Letter: B
Question
BXV, Inc. is considering a 15-year investment project that will cost $300,000. It is estimated that none of the $300,000 will be returned to BXV at the end of the project's life. BXV's discount rate is 10%. What is the minimum amount of profit that BXV would need each year of the project's life for this project to be acceptable (rounded)? (NOTE: The present value of $1 for 15 periods at 10% is 0.315. The present value of an annuity of $1 in arrears for 15 periods at 10% is 8.559.)
A) $20,000 B) $22,000 C) $24,000 D) $35,051 E) $94,500 BXV, Inc. is considering a 15-year investment project that will cost $300,000. It is estimated that none of the $300,000 will be returned to BXV at the end of the project's life. BXV's discount rate is 10%. What is the minimum amount of profit that BXV would need each year of the project's life for this project to be acceptable (rounded)? (NOTE: The present value of $1 for 15 periods at 10% is 0.315. The present value of an annuity of $1 in arrears for 15 periods at 10% is 8.559.) $20,000 $22,000 $24,000 $35,051 $94,500Explanation / Answer
D) $35,051
We need a NPV of atleast 0. Let the profits be 'x'
Hence,
-300000 + x*PVIFA(10%,15) > 0
x*8.559 > 300000
x > 35050.82
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.