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A project is expected to generate the after-tax cash flows shown below. The company's weighted average cost of capital is 8.5% per year, its tax
A project is expected to generate the after-tax cash flows shown below. The company's weighted average cost of capital is 8.5% per year, its tax rate is 35%, its beta is 0.9, and its retention ratio is 40%. The risk-free rate is 3% per year and the market risk premium is 5% per year. What are the project's payback period, net present value, profitability index, internal rate of return, and modified internal rate of return? Should the company pursue the project?
Year | Year | Year | Year | Year | |
0 | 1 | 2 | 3 | 4 | |
Cash Flow | -1,800 | 600 | 600 | 600 | 600 |
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