Question

(NPV,

PI, and IRR

calculations)

Fijisawa Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay would be

$2 comma 000 comma 0002,000,000,

and the project would generate incremental free cash flows of

$600 comma 000600,000

per year for

77

years. The appropriate required rate of return is

66

percent.a. Calculate the

NPV.

b. Calculate the

PI.

c. Calculate the

IRR.

d. Should this project be accepted?

Answer #1

(A)
A company is considering a major expansion of its product line. The
initial outlay would be $10,100,000 and the project would generate
cash flows of $1,290,000 per year for 20 years. The appropriate
discount rate is 10%. (a) calculate the NPV (b) calculate the PI
(c) calculate the IRR (d) should this project be excepted?
(B) The same company is considering a new system for its lot.
The system will provide annual labor savings and reduced waste
totaling $175,000...

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