Should she buy?
•NPV of purchase =
–.65(600,000/1.1) + .35(200,000/1.1) –400,000= $18,181.82
•Therefore, she should do the project!
•What happens if the discount rate = 15%?
–The NPV = 0, so it probably is not worth it.
•What happens if the discount rate = 20%?
–The NPV = -$16,666.67; so you should not buy!