Calculate the NPV, IRR and PBP of the project

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Problem - Briarcliff Stoves Ltd is considering a new product line to supplement its line of kitchen ranges. It is anticipated that the new product line will involve cash investments of $700,000 at time 0 and a net cash outflow of $1.0 million in year 1. After-tax cash inflows of $250,000 are expected in year 2, $300,000 in year 3, $350,000 in year 4 and $400,000 in each of the following six years. While the product line might continue to be viable after year 10, the company prefers to be conservative and end all calculations at that time. If the required rate of return is 15 percent, calculate the NPV, IRR and PBP of the project? Is it acceptable? Explain your results.

Reference no: EM133018670

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