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Firm W has the opportunity to invest $188,000 in a new venture. The projected cash flows from the venture are as follows. Use Appendix
Firm W has the opportunity to invest $188,000 in a new venture. The projected cash flows from the venture are as follows. Use Appendix A and Appendix B. Initial investment After-tax cash flow Return of investment Net cash flow Year 0 $ (188,000) Req A1 Req A2 $ 6,000 $ (188,000) $ 6,000 Required: a1. Complete the below table to calculate NPV. Assume Firm W uses a 6 percent discount rate. a2. Should Firm W make the investment? Net cash flow Discount factor (6%) Present value NPV Year 1 b1. Complete the below table to calculate NPV. Assume Firm W uses a 3 percent discount rate. b2. Should Firm W make the investment? Complete this question by entering your answers in the tabs below. Req B1 Year 2 Req B2 $ 9,000 $ 9,000 < Reg A1 Year 3 $ 10,800 188,000 $ 198,800 Complete the below table to calculate NPV. Assume Firm W uses a 6 percent discount rate. Note: Cash outflows and negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places. Year 0 Year 1 Year 2 Year 3 Req A2 > Req A1 Req A2 Req B1 Should Firm W make the investment? Firm W should make the investment Req B2 Req A1 Req A2 Req B1 Net cash flow Discount factor (3%) Present value NPV Complete the below table to calculate NPV. Assume Firm W uses a 3 percent discount rate. Note: Cash outflows and negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places. Year 1 Year 2 Req B2 Year 0 Year 3 Req A1 Req A2 Req B1 Should Firm W make the investment? Firm W should make the investment Req B2
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