Determine the optimal abandonment period

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Reference no: EM132581942

consider a project with the following cash flow;

Year cash flow shs '000' abandonment value shs '000'

0 (16,000)

1 7,000 ___________

2 6,000 1,100

3 4,000 9,000

4 4,000 5,000

The cost of capital is 15% and re-investment rate is 20%.

Required;

Question 1: Determine the optimal abandonment period.

Question 2: Outline the benefits of solution analysis.

Question 3: Agency problems are there to stay. Do you agree? Explain

Reference no: EM132581942

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