6) Twitter is considering purchasing a new Al computer to manage its platform. This computer would cost $74,250 and generate cash flows according to the following table over the next 5 years. Itshas an IRR of 12% and Twitter has a WACC of 8%. Period Cash Flows 0 $-74,250 1 $15,000 2 $17,000 3 $21,000 4 $25,000 5 $29,000 a) If you use the reinvestment assumption from the NPVmethod, what would be the total value of these inflows at the end of the 5 year period? b) If the reinvestment assumption from the IRR method is used, what would be the total value of theseinflows at the end of the 5 year period? c) Which assumption is more plausible?

a) Total value using NPV method: \[ NPV = \sum_{t=1}^{5} \frac{CF_t}{(1 + WACC)^t} + CF_0 \] \[ NPV…

Answered: 6) Twitter is considering purchasing a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

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Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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