Capital Budgeting of a Major Expansion of Product Lines
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XYZ Co. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial investment would be $2,500,000 and the project would generate incremental cash flows of $750,000 per year for six years. The cost of capital is 11 percent. Calculate the following:
i. Calculate the NPV
ii. Calculate the PI
iii. Calculate the IRR
iv. Should this project be accepted?
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Solution Summary
The solution explains how to calculate the NPV, PI, IRR and to determine whether to accept or reject the project
Solution Preview
Please see the attached file
i. Calculate the NPV
NPV = $672,903.39
ii. Calculate ...
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