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Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both
Consider the case of Cute Camel Woodcraft Company: Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Omicron is 13.8%, but he can't recall how much Cute Camel originally invested in the project nor the project's net present value (NPV). However, he found a note that detailed the annual net cash flows expected to be generated by Project Omicron. They are: Year Year 1 Year 2 Cash Flow $2,000,000 $3,750,000 $3,750,000 $3,750,000 Year 3 Year 4 The CFO has asked you to compute Project Omicron's initial investment using the information currently available to you. He has offered the following suggestions and observations: A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflows equals the discounted value of its cash outflows-when the cash flows are discounted using the project's IRR. The level of risk exhibited by Project Omicron is the same as that exhibited by the company's average project, which means that Project Omicron's net cash flows can be discounted using Cute Camel's 9% WACC. , and its NPV is (rounded to the nearest whole Given the data and hints, Project Omicron's initial investment is dollar)
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