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Question

Sorenson Stores is considering a project that has the following cash flows:

Year Cash Flow

0 CF0 = ?

1 $2,000

2 3,000

3 3,000

4 1,500

The project has a payback of 2.5 years, and the firm’s cost of capital is 12%. What is the project’s NPV? Hint: Find out CF0 first.

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