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Bestfoods, Inc. is planning to spend $10 million on advertising. The company expects this expenditure to result in annual incremental cash flows of $1.6 million

  1. Bestfoods, Inc. is planning to spend $10 million on advertising. The company expects this expenditure to result in annual incremental cash flows of $1.6 million in perpetuity. The corporate opportunity cost of capital for this type of project is 12.5%.
    1. Calculate the NPV for the planned advertising
    2. Calculate the IRR
    3. Should the company go forward with the planned advertising?

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