Assume the year five cash flow is perpetuity

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Cash flows for projects F and G are given below. Cash Flows, ($) Project C0 C1 C2 C3 C4 C5 F – 10,900 + 7,900 + 6,900 + 5,900 0 0 G – 10,900 + 2,180 + 2,180 + 2,180 + 2,180 + 2,180 The cost of capital for projects of this type is 10%. Assume that the forecasted cash flows are overstated and should be 8% lower than those provided by the project analyst. But a lazy financial manager, unwilling to take the time to argue with the projects’ sponsors, instructs them to use a discount rate of 18%. Assume the year 5 cash flow is perpetuity.

Reference no: EM131060679

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