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Initial investment is $5m, and the project will deliver $650 k of free cash per year for 20 years (This is based on assumption that
Initial investment is $5m, and the project will deliver $650 k of free cash per year for 20 years (This is based on assumption that sales of $3,000,000 cost $850,000 to deliver).
If you can borrow money from the bank at 20% calculate NPV for 20 years and show all the calculations. Write all the assumptions as well.
If all customers prepay $850,000 for year 1 only, does this change your decision (interest rate 20%)?
What would be Internal rate of return if there is no prepayment?
Find payback on the project as well.
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