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Assume that Leo has a new venture that costs $100,000. The company expects to have cash flows of $40,000 per year for the first four
Assume that Leo has a new venture that costs $100,000. The company expects to have cash flows of $40,000 per year for the first four years and $50,000 in year 5. There will be no salvage value and the companys cost of capital is 9.23%. Based on this data, calculate the NPV and decide if you would accept the project using the NPV method?
Hint: You accept a project if NPV is positive. NPV = Present value of future cash flows minus initial investment
Question 5 options:
| $61,093; accept |
| $75,120; accept |
| $89.098; reject |
| -$2096; reject |
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