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Formulas NPV CFT (1+r)T CF CF2 CF3 NPV = CFo (1+r) (1+r) (1+r)3| PV Annuity 1 (1+r) PV Annuity CF x r PV Perpetuity PV

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Formulas NPV CFT (1+r)T CF CF2 CF3 NPV = CFo (1+r) (1+r) (1+r)3| PV Annuity 1 (1+r) PV Annuity CF x r PV Perpetuity PV Perpetuity EAR - (1 - 1 EAR= + where r is the simple interest rate per period, tis the number of periods, m is the number of compounding periods per year, and CF is the cashflow in period t. IRR Question 3: A project has the following cash flows: Investment today: -$500,000 Cash Flows Years 1-3: $200,000 Cash Flow Year 4: $250,00 Is the IRR of the project less than 20%, between 20% and 25%, or greater than 25%

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