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Brown Bakery Ltd is situated in Bath that is the largest city in Summerset, England. Nellie Smith is the CFO and she is faced with

Brown Bakery Ltd is situated in Bath that is the largest city in Summerset, England.
Nellie Smith is the CFO and she is faced with a number of challenges.
Today is the 18th of May and she came to office bright and early. Already when
she arrived to her office with a cup of tee Gordon Hammersmith waited outside her
office. Gordon is head of strategy and liked a decision regarding an investment.
Upfront it was about an investment of 50 000 in a new oven. After 10 years of
use the oven is expected to be sold for 5 000. The oven is to be used for a new
innovative bread. The marketing department expect the cash flows, CF, to be as follows:
Year 1 (Y1) 2 000, Y2 8 000, Y3 9 000, Y4 12 000, Y5 15 000, Y6 11 000,
Y7 8 000, Y8 6 000, Y9 5 000 and Y10 1 000. CF to be received in the end of each year.
After having a short discussion with Gordon she decided that this investment
should fall in Risk-Class 4 with a risk premium of 10%. Base required rate is 5%.
Nellie did a calculation and said that she was sceptical. Make the calculation
Nellie did and explain her reason for being sceptical.

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