John decided to purchase a firm which is expected to generate net cash flows of $5,000 one

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John decided to purchase a firm which is expected to generate net cash flows of $5,000 one year from now, $2,000 at the end of each of the next five years and a $10,000 in seven years from now. Investments of similar characteristics and risk in the market have a discount rate of 10%.

(a)Determine the value of the firm.

(b)What is the incremental value (NPV) of this acquisition if the initial investment made by John is $12,000?

Posted Date: Nov 08, 2021 07:11 AM

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John decided to purchase a firm which is expected to generate net cash flows of $5,000 one

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