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Skyline Corp. will invest $190,000 in a project that will not begin to produce returns until...

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Finance

Skyline Corp. will invest $190,000 in a project that will notbegin to produce returns until the end of the 3rd year. From theend of the 3rd year until the end of the 12th year (10 periods),the annual cash flow will be $44,000.

Use Appendix B and Appendix D for an approximate answer butcalculate your final answer using the formula and financialcalculator methods.

  a. Calculate the net present valueif the cost of capital is 12 percent. (Negative amountshould be indicated by a minus sign. Do not round intermediatecalculations and round your answer to 2 decimalplaces.)

Net present value

b. Should the project be undertaken?Yes or No?

Please give a step by step solution using a calculator

Answer & Explanation Solved by verified expert
4.5 Ratings (752 Votes)
Initial investment 190000 period of cash flows 10 years CAsh inflow 44000 cost of capital r 12 or 012 Amount is    See Answer
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Transcribed Image Text

Skyline Corp. will invest $190,000 in a project that will notbegin to produce returns until the end of the 3rd year. From theend of the 3rd year until the end of the 12th year (10 periods),the annual cash flow will be $44,000.Use Appendix B and Appendix D for an approximate answer butcalculate your final answer using the formula and financialcalculator methods.  a. Calculate the net present valueif the cost of capital is 12 percent. (Negative amountshould be indicated by a minus sign. Do not round intermediatecalculations and round your answer to 2 decimalplaces.)Net present valueb. Should the project be undertaken?Yes or No?Please give a step by step solution using a calculator

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