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2. Multiple IRRs: A firm invests in a project that has an NINV of 7,400 and an expected life of two years. In one year
2. Multiple IRRs: A firm invests in a project that has an NINV of 7,400 and an expected life of two years. In one year the project is expected to generate a cash inflow of $20,000. In the second year, the project is expected to generate a negative cash flow of $12,800. The time line for these cash flows follows: 0 2 -87,400 +$20,000 -S12,800 a. Show that the NPV of the cash flow stream is essentially equal to zero at rates of 4% and 66%. b. What is the NPV at 0%? What is the NPV at 15%? What is the NPV at 30%? What is the NPV at 100%? c. Draw the NPV profile
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