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A corporation is planning an expansion project with an initial cost of $40,000. The expected annual cash flows are $10,000 for the next 6 years.

A corporation is planning an expansion project with an initial cost of $40,000. The expected annual cash flows are $10,000 for the next 6 years. The corporation uses a discount rate of 8%.

Requirements:

  1. Calculate the NPV of the expansion project.
  2. Determine the IRR.
  3. Compute the Discounted Payback Period.
  4. Assess the project using the Profitability Index.
  5. Recommend whether to proceed with the expansion based on the calculated financial indicators.

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