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Q10. You are provided with the following forecast cash flow information for an investment project that your company is considering: Year 1 2 3
Q10. You are provided with the following forecast cash flow information for an investment project that your company is considering: Year 1 2 3 4 5 Cash Flow -1,250,000 250,000 300,000 400,000 400,000 400,000 0 The cost of capital for the project is 10%. You are required to provide the following: a) The net present value (NPV) of the project. NPV = -1,250,000+250,000/1.10 + 300,000/1.10 +400,000/1.10 + 400,000/1.104 + 400,000/1.105 = 47,306.44 b) The payback period of the project. Payback = 4 years
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