Question
A firm is considering an investment project. The cost of the project today is $100. The project will generate perpetual cash flow of $10 every
A firm is considering an investment project. The cost of the project today is $100. The project will generate perpetual cash flow of $10 every year forever. Given the risk of the project, the proper discount rate is 12%. Which of the following statements is NOT true?
a. The project has an IRR of 10%
b. The project as a positive NPV
c. The project is located below SML
How do you calculate NPV that generates a perpetual cash flow forever?
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Financial and Management Accounting
Authors: Pauline Weetman
7th edition
1292086599, 978-1292086590
