Question: ABC, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $100,000. The future cash inflows from its project

ABC, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $100,000. The future cash inflows from its project are $40,000, $40,000, $30,000 and $30,000 for years 1, 2, 3 and 4, respectively. ABC uses the net present value method and has a discount rate of 16%.

(a). Will ABC accept the projects if the firm uses the NPV rule? Explain. (8 marks)

(b).What is the modified internal rate of return for this project?

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