Problem
For the new product in Problem 3.26, the interest rate is also uncertain. Assume the interest rate is 10% and the life is 6 years.
(a) Which has more effect: halving the life, or doubling the interest rate?
(b) Which has more effect: doubling the life, or halving the interest rate?
(c) Do your answers to parts a and b change if the life is 20 years rather than 6 years?
Problem 26
A new product will generate net revenues of $600,000 per year. The interest rate is 10%.
(a) What is the present worth of the revenue stream if the life is 6 years? 12 years?
(b) Graph the present worth for lives of 1 to 20 years.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.