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A company is evaluating a project that involves a capital expenditure of $1,000,000. The project has a lifespan of 9 years and will have no
A company is evaluating a project that involves a capital expenditure of $1,000,000. The project has a lifespan of 9 years and will have no salvage value. It will generate annual net cash flows of $180,000. The company's tax rate is 40%. The present value factors for 9 years are given below:
Discount Rate | Cumulative Factors |
8% | 6.247 |
10% | 5.759 |
12% | 5.328 |
14% | 4.946 |
16% | 4.605 |
Requirements:
- Compute the NPV at each discount rate.
- Find the IRR of the project.
- Evaluate the profitability index for the project.
- Discuss the project's financial viability based on the calculated metrics.
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