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Consider a capital expenditure project to purchase and install new equipment with an initial cash outlay...

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Finance

Consider a capital expenditure project to purchase andinstall new equipment with an initial cash outlay of $25,000. Theproject is expected to generate net after-tax cash flows each yearof $6800 for ten years, and at the end of the project, a one-timeafter-tax cash flow of $11,000 is expected. The firm has a weightedaverage cost of capital of 12 percent and requires a 3-year paybackon projects of this type. Determine whether this project should beaccepted or rejected using NPV, IRR, PI, and PB. (Please show workwithout excel)

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4.1 Ratings (676 Votes)
PVFPVAF AT 12 Year cash flow disccf 110 680000 565 3842000 10th year 1100000 0322 354200 4196200 Net present valueNPVpresent value of cash inflowspresent value of cash outflows 41962 25000 1696200 As per NPVProject should be accepted as it has positive NPV IRR is the    See Answer
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Transcribed Image Text

Consider a capital expenditure project to purchase andinstall new equipment with an initial cash outlay of $25,000. Theproject is expected to generate net after-tax cash flows each yearof $6800 for ten years, and at the end of the project, a one-timeafter-tax cash flow of $11,000 is expected. The firm has a weightedaverage cost of capital of 12 percent and requires a 3-year paybackon projects of this type. Determine whether this project should beaccepted or rejected using NPV, IRR, PI, and PB. (Please show workwithout excel)

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