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You are evaluating a project which will cost $4,000 and has an expected future cash flow of $500 per year, forever, if it is started
You are evaluating a project which will cost $4,000 and has an expected future cash flow of $500 per year, forever, if it is started immediately. However, if you start the project four years from now, the cost will increase to $5,000 and the expected future cash flows will increase to $750 per year (and continue to be so forever). If the required rate of return is 8%, using NPV, what would your decision be? Assume that under both scenarios, the cash inflows will occur at the end of each year. (Tip: Check problem #3 on Practice Problem Set 8.)
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