2. Winlett Enterprise, a small business maintains a capital structure of 2:3. The firm is considering expanding

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2. Winlett Enterprise, a small business maintains a capital structure of 2:3.

The firm is considering expanding its area of operation with an initial cost estimation of US$100,000. The interest rate on loans is 12 %, while the opportunity cost on the firm’s own funds is 8 %. The expected annual free cash flows from the project are as follows:

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Using NPV and MIRR project evaluation methods, on the assumption that the cash flows are reinvested at the cost of capital rate, is the project a viable one?

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