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ch4aika [34]
4 years ago
8

Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The firm expects the project to gene

rate annual cash flows of $7 million over the next five years. Its cost of capital is 18 percent. What is the net present value of this project
Business
1 answer:
Alisiya [41]4 years ago
3 0

Answer:

NPV = $0.89 million

Explanation:

The net present value is an important concept in evaluation a project. It calculates the return a project provides when discounted at the required rate. The initial cost involved in the project is deducted from the discounted cash flows provided by the project and if the NPV is positive, the project should be proceeded with.

The formula for NPV is,

NPV = CF1 / (1+r) + CF2 / (1+r)^2 + ... + CFn / (1+r)^n - Initial outlay

NPV = 7 / (1+0.18) + 7 / (1+0.18)^2 + 7 / (1+0.18)^3 + 7 / (1+0.18)^4 + 7 / (1+0.18)^5 - 21

NPV = $0.89 million

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Answer: Peripheral route.

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The persuasion follows two routes; the central route, and the peripheral route:

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3 years ago
Suppose the demand function​ (D) for golf clubs​ is: Qequals150minus1.00​P, where P is the price paid by consumers in dollars pe
nadya68 [22]

Answer:

P = $75 per club

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8 0
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