A four-year life project has an initial capital expenditure of $3,000 and annual operating costs beginning at the end of the year 1 of $2,000. At the end of the years of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%. and inflation is 3%. Calculate the IRR in constant dollar. O 57% O 25% O 34% O 15%

A four-year life project has an initial capital expenditure of $3,000 and annual operating costs beginning at the end of the year 1 of $2,000. At the end of the years of 2, 3, and 4 the project receives $7,000 as income. Assume that the cash flows given are in today dollars, and that incomes are escalated at 5%, costs are escalated at 6%. and inflation is 3%. Calculate the IRR in constant dollar. O 57% O 25% O 34% O 15%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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