Question

Newport Department Store is considering development of an e-commerce business. The company estimates that development requires an initial outlay of $1,470,000. Other cash flows will be as follows:
Year 1......... ($700,000)
Year 2......... $221,000
Year 3......... $750,000
Year 4......... $850,000
Year 5......... $940,000

Required
Assuming the company limits its analysis to five years; estimate the internal rate of retum of the e-commerce business. Should the company develop the e-commerce business if the required rate of retum is 12 percent?



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  • CreatedSeptember 23, 2013
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