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The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of $155,000. The project only
The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of $155,000. The project only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has and note be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its sign. PV of future CFs: $ NPV: $ b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the project's NPet round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sige $
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