A company is planning to start an investment, which will cost an initial investment of...
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A company is planning to start an investment, which will cost an initial investment of $ 215 million. The management has already forecasted all future cash flows from this project: $55 million each year in the first 3 years, $50 million in the last 4 years. At the end of year 4 the machine has to be revised, which will cost $65 million. The investment (machinery etc) will be sold at the end of year 7 for a price of $45 million.
a) Calculate the Internal Rate of Return.
b) Given a MARR of 13% annual nominal, compounded annually: should the company accept this investment or not?
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