Question: A planned factory expansion project has an estimated initial cost of $1,000,000. Using a discount rate of 15% the present value of future cost
A planned factory expansion project has an estimated initial cost of $1,000,000. Using a discount rate of 15% the present value of future cost savings from the expansion is $1,500,000. To yield exactly a 15% internal rate of return, the actual investment cost cannot exceed the $1,000,000 estimate by more than which of the following? (Ignore income taxes in this problem.) $1,075 $20,000 $500,000 $160,000
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