Assumethefollowingforaprojectunderevaluation: Theproject'slifeis4years. Thetotaltimezero,initialcostof$55,000. Thetotalnetoperatingcashfloweachyearis$15,000. Inadditiontotheterminalyearoperatingcashflow, thereisanonoperating,terminalyearcashflowof $8,000. Whatistheproject'sIRR?Acceptorrejecttheproject? Again,assumethecostofcapitalforaprojectofthisrisk is7%. 7%indifferenttoacceptorreject 8.4%reject 8.4%accept 15.75%,reject 15.75%:accept
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Question:
Assumethefollowingforaprojectunderevaluation: Theproject'slifeis4years. Thetotaltimezero,initialcostof$55,000. Thetotalnetoperatingcashfloweachyearis$15,000. Inadditiontotheterminalyearoperatingcashflow, thereisanonoperating,terminalyearcashflowof $8,000. Whatistheproject'sIRR?Acceptorrejecttheproject? Again,assumethecostofcapitalforaprojectofthisrisk is7%.
7%indifferenttoacceptorreject
8.4%reject
8.4%accept
15.75%,reject
15.75%:accept
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