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Calculate NPV and IRR

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Growth Enterprise believes its latest project, which will cost $80,000 to install, will generate a perpetual growing stream of cash flows. Cash flows at the end of this year will be $5,000 and cash flows in future years are expected to grow indefinitely at an annual rate of 5%.

A. If the discount rate for this project is 10%, what is the projected NPV?

B. What is the project IRR?

Please see attached template 6-38

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1. Front up cost of plant is $100 million. Profits of $30million at the end of every year. Calculate the NPV if the cost of capital is 8%. Should you take the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

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