Ronald Ice Cream Company is considering investing in a new factory. The firm's cost of...
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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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