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ABC company is considering a project with an initial investment of $1500 followed by a cash inflow of $500, $750, and $880 in the
ABC company is considering a project with an initial investment of $1500 followed by a cash inflow of $500, $750, and $880 in the next three years. This project has a discount rate of 15%. The CFO is concerned about the high financing cost in the current market and expects the cost of capital may increase or decrease by 20% and asks you, the CFO's assistant, to conduct a sensitivity analysis of the project with regard to the discount rate change. What impact will the change in the discount rate be on the project's NPV? What will be the range of the NPV change? What is the break-even discount rate for the NPV of this project?
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To analyze the sensitivity of the projects net present value NPV to changes in the discount rate well calculate the NPV for different discount rate sc...Get Instant Access to Expert-Tailored Solutions
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