Rita is considering a project which would cost $5000 now. The annual benefits for four years would be a fixed income of $2500 a year plus other savings of $500 a year in year 1, rising by 5% each year because of inflation. Running costs will be $1000 in the first year but would increase at 10% each year because of inflating labour costs. The general rate of inflation is expected to be 7.5% and the company’s required nominal rate of return is 16%. Is the project worthwhile? Ignore taxation.
Mathbot Says...
I wasn't able to parse your question, but the HE.NET team is hard at work making me smarter.