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Question 2 An investment is expected to generate the following cash flows: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 -$3,000,000
Question 2 An investment is expected to generate the following cash flows: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 -$3,000,000 $1,000,000 $0 $1,000,000 $500,000 $1,500,000 The discount rate is 15% per year. a. Based on the net present value rule, should the investment be accepted? Show your work. b. Based on the payback period rule, should the investment be accepted if the benchmark period is four years? Show your work. C. Based on the discounted payback period rule, should the investment be accepted if the benchmark period is four years? Show your work
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