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A firm plans to invest in a new technology project with an initial outlay of $650,000. The project has a 5-year life and no salvage
A firm plans to invest in a new technology project with an initial outlay of $650,000. The project has a 5-year life and no salvage value. It will generate annual net cash inflows of $140,000. The firm's tax rate is 30%. The present value factors for 5 years are as follows:
Discount Rate | Cumulative Factors |
8% | 3.993 |
10% | 3.791 |
12% | 3.605 |
14% | 3.433 |
16% | 3.274 |
Requirements:
- Calculate the NPV at each discount rate.
- Determine the IRR of the project.
- Analyze the impact of tax rate on the project's NPV.
- Recommend whether to proceed with the investment based on financial metrics.
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