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10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6,500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680

10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6,500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...
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10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6, 500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680
Transcribed Image Text:10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6, 500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680
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