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Scranton is a multi-product firm with a weighted cost of capital of 14 percent and a risk-adjusted discount rate for its tannery division of 17
Scranton is a multi-product firm with a weighted cost of capital of 14 percent and a risk-adjusted discount rate for its tannery division of 17 percent. A planned expansion in the tannery division requires a net investment of $170,000 and results in expected cash inflows of $42,000 a year for seven years. Should Scranton invest in this expansion?
Question 2 options:
Yes, NPV = $ 9,890
No, NPV = -$9,897
Yes, NPV = $10,087
No, NPV = -$5,260
I came up with the answer -5,260. would that be correct?
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