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V N Edit & Gutierrez Corp., has received a proposal for investment in an aerial fumigation business. This involves purchasing of small aircraft and getting
V N Edit & Gutierrez Corp., has received a proposal for investment in an aerial fumigation business. This involves purchasing of small aircraft and getting some permits for operation. Details about the deal are below: $110,000 10 years Aircraft cost Estimated life of project Net income per year (estimated) Interest rate charged by banks Salvage value $4,200 ten percent $10,000 Assume Gutierrez uses a simple, straight-line depreciation method. Tasks to complete: 1. Calculate the payback period for the investment. 2. In the context of the net present value, would you advise Gutierrez to invest in this business? 3. What is the project's IRR? 4. If banks' interest rate was 6%, how would your answer to question 2 change
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