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An analyst is preparing a project evaluation for a proposedexpansion into a new line of business. The following are expected cash flows for the project

An analyst is preparing a project evaluation for a proposedexpansion into a new line of business. The following are expected cash flows for the project for the next six years: T=0 Y1 Y2 Y3 Y4 Y5 Y6 Expected Cash Flows ($Ms)-2,0005007107809901210-1,605 The initial investment of $2.0B will be invested immediately. The cash flows in year 6 are reclamation costs (the project involves destruction of wilderness environmental regulation requires cleanup of the site at the end of the project, returning the land back to its original state this costs just over $1.6B). You may assume that all yearly cash flows occur at year end. The appropriate discount rate given the risk of the project is 12.0%. Using the NPV and IRR methods, should Travelers invest in this new project?

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