. Changes in the Economic Environment. Four years ago, Belanger Properties, Inc. invested \(\$ 10,000,000\) in a venture in an economic development zone in another country. The investment was estimated to have a 10 -year life and was expected to produce a cash inflow of \(\$ 2,500,000\) each year before income taxes.

It did exactly this for four years. Conditions are less favorable now, and the revised estimate indicates that the annual cash inflow will be only \(\$ 1,300,000\) but will last for eight more years. Because of its foreign investment classification, it has a special tax status and is not subject to normal income taxes. The investment can now be sold for \(\$ 5,400,000\). At present, an investment can be justified only if the IRR is expected to be at least 18 percent.

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Should the investment be sold for \(\$ 5,400,000\) or be continued? Show computations using the NPV method. Comment on the changed estimates.