Revenues is greater than the initial cost

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You are thinking of investing in a project that will pay $70,000 per year for 20 years, starting in 10 years. Even better, this $70,000 will grow at a rate of 3 percent annually. The project costs $600,000, and you would have to pay this today. Should you accept this project on the basis of whether the PV of revenues is greater than the initial cost? Assume a discount rate of 7 percent. Hint: draw the time line of cash flows.

Reference no: EM131957071

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