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Last Tuesday, Cute Camel Woodcraft Company lost a portion of its planning and financial data when both its main and its backup servers crashed.
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 Zeta is 14.6%, 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 Zeta. They are: Year Year 1 Cash Flow $2,000,000 Year 2 $3,750,000 Year 3 $3,750,000 Year 4 $3,750,000 The CFO has asked you to compute Project Zeta'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-wher $9,406,225 are discounted using the project's IRR. The level of risk exhibited by Project Zeta is the same Zeta's net cash flows can be discounted using Cute Ca d by the company's average project, which means that Project $9,683,213 $9,266,330 $10,793,380 Given the data and hints, Project Zeta's initial investment is Hollar). and its NPV is (rounded to the nearest whole A project's IRR will if the project's cash inflows decrease, and everything else is unaffected.
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