Question
2. Several companies, including Indigo River Packaging and White Mountain Banking, are considering project A, which is believed by all to have a level of
2. Several companies, including Indigo River Packaging and White Mountain Banking, 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 Indigo River Packaging. Project A is a project that would require an initial investment of 6,149 dollars and then produce an expected cash flow of 10,964 dollars in 8 years. Project A has an internal rate of return of 7.5 percent. The weighted-average cost of capital for Indigo River Packaging is 8.8 percent and the weighted-average cost of capital for White Mountain Banking is 9.97 percent. What is the NPV that White Mountain Banking would compute for project A?
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