Fox Enterprises is considering expanding into the growing laser copier business. Fox estimates that this expansion will

Question:

Fox Enterprises is considering expanding into the growing laser copier business. Fox estimates that this expansion will cost $1.8 million and will generate a 20-year stream of expected net cash flows amounting to $400,000 per year. The company’s weighted is 15 percent.
a. Compute the of the laser copier project using the company’s weighted and the expected cash flows from the project.
b. Using the risk-adjusted approach, management has decided that this project has substantially more risk than average and has decided that it requires a 24 percent expected rate of return on projects like this. Recompute the risk-adjusted of this project.

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