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Calculate the net present value

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Random, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be $1,960,000, and the project would generate cash flows of $380,000 per year for six years. The appropriate discount rate is 4.0%.

  • Calculate the net present value.
  • Calculate the profitability index.
  • Calculate the internal rate of return.
  • Should this project be accepted? Why or why not?

Reference no: EM132348792

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