Question: Consider the following project. Which answer is closest to correct? You invest $675 in an equipment project that earns you $100 in cash flows for
Consider the following project. Which answer is closest to correct? You invest $675 in an equipment project that earns you $100 in cash flows for five years. At the end of five years, you sell the equipment for $500. Assume a cost of capital of 10%. Assume a 0% tax rate. Assume the 10 year Treasury rate is 3%. Question 1 options: Invest because the project has a positive NPV of around $15 Invest because the positive cash flows exceed the total relevent costs Do not invest because the NPV is negative Invest because the project has an IRR of 20% which is above your cost of capital
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