Trilever is planning to establish a new factory overseas. The project requires an initial investment of $15 million. Management intends to run this factory for six years and then sell it to a local entity. Trilever’s finance department has estimated the following yearly cash flows:
Year………………………… Cash Flow ($)
0………………………… −15,000,000
1………………………… 4,000,000
2 ………………………… 4,000,000
3 ………………………… 4,000,000
4 ………………………… 4,000,000
5 ………………………… 4,000,000
6 ………………………… 7,000,000
Trilever’s CFO decides that the company’s of 19 percent is an appropriate hurdle rate for this project.
A. Calculate the of this project.
B. Make a recommendation to the CFO concerning whether to undertake this project.
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