Question

You have just been offered a contract worth $ 1.24 million per year for 7 years.​ However, to take the​ contract, you will need to purchase some new equipment. Your discount rate for this project is 11.6 %. You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV​?

The most you can pay for the equipment and achieve the 11.6% annual return is ​$___ million. ​(Round to two decimal​ places.)

Answer 1

	i	ii	iii=i*ii
Year	Cash flow	PVIF @ 11.6%	present value
1	1.24	0.896057	1.11
2	1.24	0.802919	1.00
3	1.24	0.719461	0.89
4	1.24	0.644679	0.80
5	1.24	0.577669	0.72
6	1.24	0.517625	0.64
7	1.24	0.463821	0.58
			5.73	million
	therefore answer is 5.72 mil (its not 5.73mil becauase at 5.73 we will have ZERO NPV and we
	need to have positive NPV therfore putting 0.01mil higher amount for the answer.