Northern Distributors expects a 17% rate of return on their investments. They are considering a 15 year
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Question:
Northern Distributors expects a 17% rate of return on their investments. They are considering a 15 year project which will cost them $100,000 immediately, $10,000 each year for years 2 to 6, $20,000 each year for years 7 to 11 and $25,000 each year for the years 12 to 15 of the project. Should they take on the project if it will return $30,000 at the end of each year for the first 3 years, $40,000 at the end of each year in the next 4 years, and $60,000 at the end of each year for the last 8 years?
- Prepare a fully documented timeline of all cash flows
- Calculate the NPV of the project.
- Calculate the ROI of the project.
- Determine the payback period of the project
- Would you go ahead with the project? Why/why not?
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