Question 4 Consider a project costing S$ 4 , 0 0 0 , 0 0 0 for
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Consider a project costing S$ for a machine today ie Year and delivering cash flow from assets of S$ S$ S$ S$ over the next years starting from the next year, ie Year Due to the fastmoving nature of the products, it is anticipated that after years, the product would be discontinued, and the machine, depreciated by then, would be scrapped without value. The tax rate is the expected rate of return is and management team usually wants to recuperate its investment within years.
Question a
Calculate the NPV and indicate whether or not the project should be launched.
Question b
Without any calculation, infer from the above question whether the IRR of the project
is larger, smaller or equal to the expected rate of return. Explain your answer.
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