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You have been asked to evaluate a project with the following characteristics: . Initial Cost of $100,000 Will produce cash flows of $20,000 per year
You have been asked to evaluate a project with the following characteristics: . Initial Cost of $100,000 Will produce cash flows of $20,000 per year for the next 8 years Must pay $30,000 at the end of year 8 for environmental clean up Required Rate of Return on this investment = 9% What should we advise this company to do? Answer the questions below and produce a recommendation. a. What is the Net Present Value /NPV) of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. A negative answser should be indicated by a minus sign. ) b. How would this project change the value of the company if our calculations are correct? (Note: a positive number means this project will increase the value of the company, a negative number means this project will reduce the value of the company.) c. Should we advise this company to "Accept" or "Reject" this project based on the calculations above? (Type "Accept" or "Reject" to answer.) a. NPV b. Effect on Value c. Accept or Reject
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