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In: Finance

Cullumber Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that...

Cullumber Corp. management is planning to spend $650,000 on a new marketing campaign. They believe that this action will result in additional cash flows of $336,000 each year for three years. If the discount rate is 17.5 percent, what is the NPV on this project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to 0 decimal places, e.g. 1,525.)

Solutions

Expert Solution

Year Cash flow Present value of 1 Present value of cash flow
a b c=1.175^-a d=b*c
0 $       -6,50,000      1.0000 $       -6,50,000
1 $         3,36,000      0.8511 $         2,85,957
2 $         3,36,000      0.7243 $         2,43,368
3 $         3,36,000      0.6164 $         2,07,122
NPV $             86,447

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