Question: You are considering a project for which you estimate a large initial cash outflow, followed by several years of cash inflows. During your capital budgeting

You are considering a project for which you estimate a large initial cash outflow, followed by several years of cash inflows. During your capital budgeting analysis, you realize that a state environmental law will require you to remove all underground equipment at the end of the project. Assume that the cost of complying with this law makes your Incremental Free Cash Flow number in the final year of the project negative. How might this change your use and/or interpretation of the IRR result?

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