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Ch 10: Assignment - The Basics of Capital Budgeting Evaluating Cash Flows Consider the case of Free Spirit Industries Inc.: Free Spirit Industries Inc. is
Ch 10: Assignment - The Basics of Capital Budgeting Evaluating Cash Flows Consider the case of Free Spirit Industries Inc.: Free Spirit Industries Inc. is considering investing $550,000 in a project that is expected to generate the following net cash flows: Year Cash Flow $325,000 Year 1 Year 2 $425,000 Year 3 $500,000 Year 4 $450,000 Free Spirit uses a WACC of 8% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this project's PIC to four decimal places). O 2.1528 2.7860 2.5327 O 2.6593 Free Spirit's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's PI, the firm should the project By comparison, the nat present value (NPV) of this project in In the project because the project On the basis of this evaluation criterion, Free Spirit should Increase the firm's value When a project has a PI greater than 1.00, it will exhibit an NPV Projects with PIS 1.00 will exhibit negative N. when it has a Pt of 1.00, it will have an NPV equal to $0
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