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Oakmont Company is considering a project what would have a five year life and require a $2,400,000 investment in equipment. At the end of five
Oakmont Company is considering a project what would have a five year life and require a $2,400,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salage value. The company's discount rate is 12%. The project detail each year is as below Sales Variable costs Fixed expenses Advertising, salaries and other costs Depreciation $3,200,000 $1,800,000 $700,000 $300,000 1) Compute the project's net present value. (2 marks) 2) Compute the project's payback period. (1 mark) 3) Compute the project's internal rate of return (2 marks) 4) How would you rank projects based on each of the three methods? Which method do you prefer and why
Oakmont Company is considering a project what would have a five year life and require a $2,400,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salage value. The company's discount rate is 12%. The project detail each year is as below
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