Calculations of the annual net cash flows

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Suppose you are the risk manager for a company considering a $5,200,000 investment in a new 12-year project. The $5.2 million cost of the project will be depreciated on a straight-line basis over 10 years. The project is expected to generate positive operating cash flows equal to $1,580,000 per year (not including the effect of depreciation or taxes). The company's tax rate is 34%. Ignoring any risk management considerations, evaluate the project by calculating its net present value and internal rate of return. Assume the company has a required return of 12%. Clearly show your calculations of the annual net cash flows and how you calculated the NPV and IRR.

Reference no: EM132345916

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