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Network Service Center is considering purchasing a new computer network for $82,000. It will require additional working capital of $13,000. Its anticipated eight-year life will generate additional client revenue of $33,000 annually with operating costs, excluding depreciation, of $15,000. At the end of eight years, it will have a salvage value of $9,500 and return $5,000 in working capital. Taxes are not considered.
Required:
a.If the company has a required rate of return of 14%, what is the net present value of the proposed investment?
b.What is the internal rate of return?
Not-invented-here Bias
A cognitive bias in organizations and individuals that undervalues or dismisses innovations or solutions that originated elsewhere.
Organizational Efforts
The collective actions and strategies employed by an organization to achieve its goals and objectives.
Sunk Costs
Permanent losses of resources incurred as the result of a decision.
Economic Considerations
The factors related to the financial implications of decisions, including costs, benefits, and the overall impact on financial health.
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