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    Capital Budgeting for major expansion: Calculate the NPV for the project.

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    A company is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,950,000 and the project would generate incremental after-tax cash flows of $450,000 per year for six years. The appropriate required rate of return is 9 percent.

    1. Calculate the NPV

    2. Should project be accepted?

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    Solution Summary

    The solution shows and explains the formula for calculation followed by the solution and a statement of whether the project should be accepted.