A company is changing a process. The process change will decrease operating expenses but will require a
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A company is changing a process. The process change will decrease operating expenses but will require a new material in the process. There will be no effect on sales. To launch this initiative, the company will need to purchase a beginning inventory of the new materials and train their employees. Free cash flows from the project are forecasted as shown below. There is no terminal value. The company has a 10.00% cost of capital (i.e., the required rate of return is 10.00%). What is the maximum investment the company should make for this project?
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Initial Investment | $50,000 | $45,000 | $40,000 | $35,000 | $30,000 |
Enter your answer as a monetary amount rounded to four decimal places, but without the currency symbol.
Expert Answer:
To calculate the maximum investment the company should make for this project we need ... View the full answer
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