Question
Your firm is about to decide whether or not to invest in a new project opportunity. Find below the available information on the new project
Your firm is about to decide whether or not to invest in a new project opportunity. Find below the available information on the new project opportunity:
The initial cash outlay will total Ghc250, 000.00 over two (2) years. The firm expects to invest Ghc200, 000.00 immediately, and the final Ghc50, 000.00 in one years time. The company predicts that the project will generate a stream of earnings of Ghc50,000.00, Ghc100,000.00, Ghc200,000.00, and Ghc75,000.00 per year, respectively, starting in year two (2). The required rate of return is 12%, and the expected rate of inflation over the life of the project is forecast to remain steady at 3%.Would you advise to invest in this project? Please, justify your response.
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