Question
A project has an initial investment of $765,342. The cash flows over the four-year life of the investment are projected to be $312,815, $253,408, $75,380,
A project has an initial investment of $765,342. The cash flows over the four-year life of the investment are projected to be $312,815, $253,408, $75,380, and $245,348.
(a) If the opportunity cost of capital is 0%, what is the project's NPV? Would you accept the project? (b) If the opportunity cost of capital is 10%, what is the project's NPV? Would you accept the project? (c) What is the project's IRR? Would you accept the project if the opportunity cost of capital was 10%
For question A I got 121,609 and I said I WOULD accept the project
For question B I got (43,024.12) and I said I WOULD NOT accept the project
For question C I got 7% (Is this correct for the IRR and I also said NO to the project because the IRR is lower than the cost of capital so the project return will fall short of the minimum requirement.
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