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NPV and maximum return A firm can purchase new equipment for a $24,000 initial investment. The equipment generates an annual after-tax cash inflow of 88,000 for 5 years.
a. Determine the net present value (NPV) of the asset, assuming that the firm has a cost of capital of 12%. Is the project acceptable?
b. Determine the maximum required rate of return that the firm can have and still accept the asset.
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