Investment Question

Apr 2010
13
0
I am not sure where to go with this problem. It seems like it should be easy, but I am drawing a blank on where to start. (Headbang) Can anyone help me with some direction for the way to solve for the solution provided at the end of the question?

[FONT=&quot]You have the opportunity to invest $30,000 in a project that will generate a pretax return of $7,000 annually for the next nine years. You are in the 27% tax bracket, and your after-tax required rate of return is 13%. Should you make the investment?[/FONT]
[FONT=&quot]Net Present Value = −$3777.24, no [/FONT]
 
Dec 2007
3,184
558
Ottawa, Canada
Flows = 7000 - .27(7000) = 5110
You have 9 annual flows of $5110, rate of 13%; calculate PV, then compare to $30,000