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Fijisawa Inc. is considering a major expansion of its product line and has estimated the following...

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Question

Accounting

Fijisawa Inc. is considering a major expansion of its productline and has estimated the following cash flows associated withsuch an expansion. The initial outlay would be

$2,000,000 ,

and the project would generate incremental free cash flowsof

$500,000

per year for

6

years. The appropriate required rate of return is

7

percent.

a. Calculate the

NPV.

b. Calculate the

PI.

c. Calculate the

IRR.

d. Should this project be accepted?

a.

What

is the project's

NPV ?

(Round to the nearest? dollar.)

Answer & Explanation Solved by verified expert
3.8 Ratings (409 Votes)
Initial cash outflow 2000000 Annual cash inflows 500000 Time 6 years Required rate of return 7 Present value of cash inflows Annual cash inflow x Present value annuity factor 76 500000 x 4767 2383500 a NPV Present value of cash inflows Present value of cash    See Answer
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