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Question
Use the following to answer the following question(s).The information below describes a project with an initial cash outlay of $10,000 and a required return of 12%.
| After-tax cash inflow | |
| Year 1 | $6,000 |
| Year 2 | $2,000 |
| Year 3 | $2,000 |
| Year 4 | $2,000 |
You have been asked to analyze a capital investment proposal. The project's cost is $2,775,000. Cash inflows are projected to be $925,000 in Year 1; $1,000,000 in Year 2; $1,000,000 in Year 3; $1,000,000 in Year 4; and $1,225,000 in Year 5. Assume that your firm discounts capital projects at 15.5%. What is the project's NPV?
A) $101,247
B) $285,106
C) $473,904
D) $582,380
Answer
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