Question
1, Several companies, including Platinum Water Packaging and Red Royal Food, are considering project A, which is believed by all to have a level of
1, Several companies, including Platinum Water Packaging and Red Royal Food, are considering project A, which is believed by all to have a level of risk that is equal to that of the average-risk project at Platinum Water Packaging. Project A is a project that would require an initial investment of 6,867 dollars and then produce an expected cash flow of 14,741 dollars in 7 years. Project A has an internal rate of return of 11.53 percent. The weighted-average cost of capital for Platinum Water Packaging is 10.84 percent and the weighted-average cost of capital for Red Royal Food is 12.11 percent. What is the NPV that Red Royal Food would compute for project A?
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