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South West Industries is considering a project which has the following cash flows: ...

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Question

Accounting

South West Industries is considering a project which has the following cash flows:

Year

Cash Flow

0

?

1

$4,000

2

3,000

3

3,000

4

1,500

The project has a payback period of 2.5 years. The firms cost of capital is 12 percent.

  1. What is the projects net present value (NPV).
  2. What does the NPV rule advise regarding this investment opportunity?

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