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Ronald Ice Cream Company is considering investing in a new factory. The firm's cost of capital is 12 percent.  The initial after tax cost of  the project is $5,000,000. It is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4?                         (a)        Calculate the project's NPV.                         (b)       Calculate the project's IRR.                         (c)        Should the firm make the investment?

Ronald Ice Cream Company is considering investing in a new factory. The firm's cost of capital is 12 percent.  The initial after tax cost of  the project is $5,000,000. It is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4?                         (a)        Calculate the project's NPV.                         (b)       Calculate the project's IRR.                         (c)        Should the firm make the investment?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 26P
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Ronald Ice Cream Company is considering investing in a new factory. The firm's cost of capital is 12 percent.  The initial after tax cost of  the project is $5,000,000. It is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4?

                        (a)        Calculate the project's NPV.

                        (b)       Calculate the project's IRR.

                        (c)        Should the firm make the investment?

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