Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a portion of its planning and financial data when both its main and its backupservers crashed. The company's CFO remembers that the internal rate of return (IRR) of Project Zeta is 13.2%, but he can't recall howmuch Green Caterpillar originally invested in the project nor the project's net present value (NPV). However, he found a note thatdetailed the annual net cash flows expected to be generated by Project Zeta. They are:YearCash FlowYear 1$2,400,000Year 2$4,500,000Year 3$4,500,000Year 4$4,500,000The CFO has asked you to compute Project Zeta's initial investment using the information currently available to you. He has offered the followingsuggestions and observations:• A project's IRR represents the return the project would generate when its NPV is zero or the discounted value of its cash inflowsequals the discounted value of its cash outflows-when the cash flows are discounted using the project's IRR.• The level of risk exhibited by Project Zeta is the same as that exhibited by the company's average project, which means that ProjectZeta's net cash flows can be discounted using Green Caterpillar's 7% WACC.Given the data and hints, Project Zeta's initial investment isand its NPV is(rounded to the nearest wholedollar).A project's IRR willif the project's cash inflows decrease, and everything else is unaffected.

Given the data and hints, Project Zeta's initial investment is and its NPV is (rounded to the nearest whole dollar). A project's IRR will if the project's cash inflows decrease, and everything else is unaffected.

Given the data and hints, Project Zeta's initial investment is and its NPV is (rounded to the nearest whole dollar). A project's IRR will if the project's cash inflows decrease, and everything else is unaffected.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2EB: Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will...

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