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A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows:
Increased sales to business of $160,000 for the next four years (starting in one year's time)
Increased costs of $40,000 for the next two years (starting in one year's time)
The initial capital expenditure required is $400,000.
The feasibility study cost $8,000 to conduct.
Amount borrowed to fund project is $280,000 with interest of 7.5% p.a. paid yearly.
If the firm is facing a discount rate of 10%, what is the NPV of this project?
Consider a start-up firm that has three different potential business models whose after-tax payoffs are summarized below along with their respective probabilities: With $0 in debt, which strategy has the highest expected value for equity holders?
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