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Lunatics, an e-commerce sports company wants to buy Rowdy Trading Cards at a cost of $504 million. Rowdy will operate for 20 years. They
Lunatics, an e-commerce sports company wants to buy Rowdy Trading Cards at a cost of $504 million. Rowdy will operate for 20 years. They expect annual cash flows from operations to be $70.1 million and its cost of capital is 12.1%. Draw an NPV profile of the purchase below. Compute the NPV at 12.1%, 2%, 17% and the IRR Illustrate these points on the graph below. FILL IN THE BLANK QUESTIONS IN BLACKBOARD: 1) The NPV for a discount rate of 12.1% is 2) The NPV for a discount rate of 2.0% is 3) The NPV for a discount rate of 17.0% is 4) The IRR is: point). Identify the IRR on the graph below (round to one decimal 5) Should Lunatics proceed with the purchase? 6) The reason for your answer above is because the NPV is (positive/negative). and is (less/greater) than than zero.
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