Professional cuddling therapy is a growing industry. You think you might be really good at cuddling so you decide to open a cuddle therapy business. Setting up the business will cost $14,000. Your business will be an all cash business so net income will be equal to your cash flows. You expect to earn $3,000 in net income in your first year of business and $4,000 in net income in the second year. In your third year you will sell the business for $15,000. These are all the cash flows associated with your cuddling business. The cost of capital is 15%. What is the NPV of this project? What is the IRR?

Professional cuddling therapy is a growing industry. You think you might be really good at cuddling so you decide to open a cuddle therapy business. Setting up the business will cost $14,000. Your business will be an all cash business so net income will be equal to your cash flows. You expect to earn $3,000 in net income in your first year of business and $4,000 in net income in the second year. In your third year you will sell the business for $15,000. These are all the cash flows associated with your cuddling business. The cost of capital is 15%. What is the NPV of this project? What is the IRR?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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