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In: Finance

Assume that XYZ, Inc. Corporation, Inc. is considering a new project with the following projected cash...

  1. Assume that XYZ, Inc. Corporation, Inc. is considering a new project with the following projected cash flows:

Time zero: -150,000,000

Year 1: 110,000,000

Year 2: 85,000,000

Year 3: 90,000,000

Year 4: -40,000,000

Year 5: 150,000,000

The company has already spent $4,200,000 in research and development funds to explore the new project. If the company undertakes the new project it will also require that the company abandon an existing project that produces $12,000,000 in cash flows each year over the next five years. Finally, the company's Weighted Average Cost of Capital is 11%. Please show all of your work.

  • Please calculate:
    • The project’s Net Present Value (NPV)
    • The project’s Internal Rate of Return
  • Should the firm accept the project? Why, or why not?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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