You are considering opening a new business. The business is expected to cost $1 million upfront...
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You are considering opening a new business. The business is expected to cost $1 million upfront and take a year to build. After that, it is expected to make $500,000 in the year it is opened (the year it finished building) and $200,000 in the following years. What is the payback period of this investment? If you require a payback cutoff period of three years, will you make the investment? What is the NPV for the first 3 years if the cost of capital is 12%? Year 0 Year 1 Year 2+ Discount Rate Cash Flow -1 million 500,000 200,000 12.00% You are considering opening a new business. The business is expected to cost $1 million upfront and take a year to build. After that, it is expected to make $500,000 in the year it is opened (the year it finished building) and $200,000 in the following years. What is the payback period of this investment? If you require a payback cutoff period of three years, will you make the investment? What is the NPV for the first 3 years if the cost of capital is 12%? Year 0 Year 1 Year 2+ Discount Rate Cash Flow -1 million 500,000 200,000 12.00%
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