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Assume a perfect capital market. Assume that an investment project requires 125.000 (at t=0) and that project is expected to generate a perpetually growing cash
Assume a perfect capital market. Assume that an investment project requires 125.000 (at t=0) and that project is expected to generate a perpetually growing cash flow from t=3 onwards. The cash flow at t=3 is 10.000. The annual growth rate is 3%(the cash flow at t=4 is 10.000x1,03 etc.). The cash flow at t=1 is 0 and at t=2 6.000. The internal rate of return (IRR) of the project is 10,14% and the required rate of return is 8%. What is the net present value and profitability index of the project?
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