Homework Answers
Risk adjusted discount rate = MARR + Risk premium
Risk adjusted discount rate = 8% + 5% ( 13%)
The NPV of the project is calculated as follows
NPV = - $ 50,000 + $ 20,000 ( P/A , 13% , 20 years ) - $ 10,000 ( P/A , 13% , 20 years )
where (P/A , i% , n years) = Uniform series present worth factor
NPV = - $ 50,000 + $ 20,000 x 7.024752 - $ 10,000 x 7.024752
NPV of the project = $ 20,247.52
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