Can you help me get started on this assignment?
The chief financial manager of the Picayune Daily is trying to determine of the company should purchase a second printing press to increase circulation due to recent surge in population growth in the area. He works with the sales manager, and is provided to the following projection on the prospect: initial capital cost= $50 million: cash flow from year 1-8 is as follow, in millions:
$3, $5, $7, $8, $ 9, $9, $9, $9.5. The printing press has a salvage value of $2 million at the end of eight years, and depreciation per year is $6 million. The CFO expects a return of at least 12% of capital. Which represents the best the outcome of this project?
? NPV = $(14.89) million; accept project
? NPV = $(14.89) million; decline project
? NPV = $(24.82) million; accept project
? NPV = $(24.82) million; decline project
? NPV = $11.50 million; accept project
What is the IRR on this project?
Interpret the IRR result:
? The rate that brings the project NPV to zero
? The weighted rate at which financing should be secured for this project
? The project NPV that brings the internal rate of returned zero
? None of the above
You will find the answer to this puzzling assignment inside...