Let’s say that Balik Ventures has forecasted the operating cash flows over the 5 year project life as shown in Problem 4 above. The project will entail an investment of 10% of the first year’s forecasted production costs for working capital, which will be recovered at the end of the 5-year life. In addition, the equipment will be sold for 20% of its initial cost when the project is terminated. If the firm uses a hurdle rate of 14% for similar risk projects, should they go ahead with this venture? Why or why not?

  • CreatedMay 08, 2014
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