A 15 percent discount rate produces a resulting present value for the project that is greaterthan the initial cash outflow of $100,000. Therefore, we need to try a higher discount rate tofurther handicap the future cash flows and force their present value down to $100,000. Howabout a 20 percent discount rate?This time the discount rate chosen was too large. The resulting present value is less thanthe hoped-for $100,000 figure. The discount rate necessary to discount the cash-flow streamto $100,000 must, therefore, fall somewhere between 15 and 20 percent.Present value at 15% > ICO > Present value at 20%$104,168.01 > $100,000 > $94,434.10
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