Question
Intrek is also considering a fourth project with code name D. Project D requires an initial investment of $40,000 and is expected to provide annual
Intrek is also considering a fourth project with code name D. Project D requires an initial investment of $40,000 and is expected to provide annual cash flows of $6,000 at the end of each of the next ten years. Intrek is exploring the possibility of a subsidy for project D from the State of Iowa in which it operates. The State has expressed an interest in providing a subsidy that will result in a five-year payback period for project D. The Treasurer of the State of Iowa will present the subsidy proposal to the States Finance Committee in a couple of days. From past experience he expects the members of that committee to ask how much will the subsidy be and in which year in the projects life should the subsidy be This case is only for use by students in the Spring 2023 FIN 311 course. You may not share with others or disseminate this case in any form or way. paid out to Intrek. The Treasurer has asked you to provide answers to the questions he expects the committee members to raise. The appropriate discount rate for project D is 13%. Please explain whether Intrek should accept the subsidy and invest in project D.
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