Fijisawa Inc. is considering a major expansion of its product line and has estimated the...
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Accounting
Fijisawa Inc. is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay would be
$1,950,000,
and the project would generate incremental free cash flows of
$550,000
per year for
5
years. The appropriate required rate of return is
6
percent.a. Calculate the
NPV.
b. Calculate the
PI.
c. Calculate the
IRR.
d. Should this project be accepted?
a.
What
is the project's
NPV?
$enter your response here
(Round to the nearest dollar.)b. What is the project's
PI?
enter your response here
(Round to three decimal places.)c. What is the project's
IRR?
enter your response here%
(Round to two decimal places.)
d. Should this project be accepted?(Select the best choice below.)
A.
No. The project should be rejected because the project's NPV is negative, PI is less than one, and IRR is less than the required rate of return.
B.
Yes. The project should be accepted because the project's NPV is positive, PI is greater than one, and IRR is greater than the required rate of return.
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