- You are considering an investment in a gardening business. You estimate your start-up costs to be $160,301.96. You expect rent and electricity charges to be $15,000 per year payable at the beginning of the year for 7 years. You expect revenue to be $50,000 per year for 7 years at which time you will sell your equipment for $15,000. Your MARR is 12%.
(a) Calculate the NPV for the business – should you invest?
(b) What is the IRR?
(c) By switching to solar panels you can save some money on the start-up. How much per year would you need to save to make this a worthwhile investment?
(d) The makers of your equipment are offering a rebate at the end of the first year. How large would that rebate need to be in order for you to accept this investment?
(e) The salesperson says that you have underestimated the equipment’s salvage value. What salvage value would make this an acceptable investment?
Summary
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