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Consider a four-year project promising the following cash flows: Year 0 1 2 3 4...

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Accounting

Consider a four-year project promising the following cash flows:

Year 0 1 2 3 4

Cash Flow Shs 000 (16,000) 7,000 6,000 4,000 4,000

Abandonment Value Shs. 000 - 12,000 8,000 6,000 -

The cost of capital is 10%. Determine the optimal abandonment period.

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