What is the project irr-accept or reject the project

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Reference no: EM132069036

1. Assume the following for a project under evaluation:

The project's life is 4 years.

The total time zero, initial cost of $55,000.

The total net operating cash flow each year is $15,000.

In addition to the terminal year operating cash flow, there is a non-operating, terminal year cash flow of $8,000.

What is the project's IRR? Accept or reject the project? Again, assume the cost of capital for a project of this risk is 7%.

7%; indifferent to accept or reject

8.4%; reject

8.4%; accept

15.75%, reject

15.75%: accept

2. Barmin's Corp. has acquired an additional company by purchasing its outstanding stock. Analysts forecast a period of 2 years of extraordinary growth (20 percent), followed by 1 year of unusual growth (10 percent), and finally a normal (sustainable) growth rate of 6.5 percent annually indefinitely. The last dividend was D0= $1.00 per share and the required return is 8.6%. What is D4 (i.e., the dividend expected at end of period 4)?

1.0000

1.286

1.584

1.687

1.440

Reference no: EM132069036

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