Assume that Google invests $2.42 billion in capital expenditures, including $1.08 billion related to manufacturing capacity. Assume
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1. What is the amount of annual cash flows that Google must earn from those expenditures to achieve a 15% internal rate of return? (Identify the seven-period, 15% factor from the present value of an annuity table and then divide $1.08 billion by the factor to get the annual cash flows required.)
2. BTN 11-1 must be completed to answer part 2. How does your answer to part 1 compare to Apple's required cash flows determined in BTN 11-1? What does this imply about each company's cash flow requirements for these types of projects?
Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
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