Your firm is considering a project that will cost $4.55 million up front, generate cash flows of

Question:

Your firm is considering a project that will cost $4.55 million up front, generate cash flows of $3,500,000 per year for three years, and then have a cleanup and shutdown cost of $6,000,000 in the fourth year.

a. How many IRR s does this project have?

b. Create an NPV profile for this project. (Plot the NPV as a function of the discount rate—see the Appendix.)

c. Given a cost of capital of 10%, should this project be accepted? Justify your answer.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...