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Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project Ci C2 C3 C4 C5 C6
Look at the cash flows for projects F and G given below. Cash Flows ($) NPV IRR at Project Ci C2 C3 C4 C5 C6 (%) Cg 10% F (13,500) 7,000 7,000 7,000 0 0 0 0 0 25.8 3,908 G (13,500) 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 19.8 5,172 C7 The cost of capital was assumed to be 10%. Assume that the forecasted cash flows for projects of this type are overstated by 5% on average. That is, the forecast for each cash flow from each project should be reduced by 5%. But a lazy financial manager, unwilling to take the time to argue with the projects' sponsors, instructs them to use a discount rate of 15%. a. What are the projects' true NPVs? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) NPV at 10% Project F Project G b. What are the NPVs at the 15% discount rate? (Do not round intermediate calculations. Round your answers to nearest dollar amount.) NPV at 15% Project F Project G
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