Question: 6 ) Twitter is considering purchasing a new AI computer to manage its platform. This computer would cost $ 7 4 , 2 5 0

6) Twitter is considering purchasing a new AI computer to manage its platform. This computer would cost $74,250 and generate cash flows according to the following table over the next 5 years. Its has an IRR of 12% and Twitter has a WACC of 8%.
Period Cash Flows
0 $-74,250
1 $15,000
2 $17,000
3 $21,000
4 $25,000
5 $29,000
a) If you use the reinvestment assumption from the NPV method, what would be the total value of these inflows at the end of the 5 year period?
b) If the reinvestment assumption from the IRR method is used, what would be the total value of these inflows at the end of the 5 year period?
c) Which assumption is more plausible?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!