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Several companies, including Orange Valley Shipping and Red Royal Entertainment, are considering project A, which is believed by all to have a level of risk
Several companies, including Orange Valley Shipping and Red Royal Entertainment, are considering project A, which is believed by all to have a level of risk that is equal to that of the average-risk project at Orange Valley Shipping. Project A is a project that would require an initial investment of 6,918 dollars and then produce an expected cash flow of 13,388 dollars in 8 years. Project A has an internal rate of return of 8.6 percent. The weighted-average cost of capital for Orange Valley Shipping is 9.68 percent and the weighted-average cost of capital for Red Royal Entertainment is 11.32 percent. What is the NPV that Red Royal Entertainment would compute for project A?
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