You are in charge of planning a new investment for your firm that will cost $850,000 today. The investment is expected to produce a cash flow of $450,000 in year one. Each of the following years the cash flow is expected to grow by 10% until the project stops in year 5; that is, the cash flow in year 2 will be 10% larger than the cash flow in year 1, and the cash flow in year 3 will be 10% larger than the cash flow in year 2, and so on up to year 5. The discount rate your firm uses for such a project is 10%, but the CFO is wondering how much the NPV would change by if a lower discount rate was used instead--what is the change in NPV going from a discount rate of 10% to 8% (round to the nearest dollar)?

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Absolutely I can help you with that Given the following information about the investment project Ini... View the full answer