Chapter 7: Net Present Value and Capital Budgeting

Since there are no capital gains taxes, the PV is just that cash flow, discounted back three periods. PV(Resale) = (11*500)/(1.14)3 = $3,712. NPV = -$55,000 - $63,845 + $3,712 = -$115,133. In order to calculate the equivalent annual cost, set the NPV of the word processor equal to an annuity with the same economic life and discount rate. Since ... ................
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