NPV = Present value of future cash inflow discounted at discount rate - initial outlay
NPV = 550000/(1+0.077)^1 + 550000/(1+0.077)^2 + 550000/(1+0.077)^3 - 1000000
NPV = $425111.20 Answer
The option A is correct.
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An auto-parts company is deciding whether to sponsor a racing team for a cost of $1...
An auto-parts company is deciding whether to sponsor a racing team for a cost of $1 million. The sponsorship would last for three years and is expected to increase cash flows by $560,000 per year. If the discount rate is 6.4%, what will be the change in the value of the company if it chooses to go ahead with the sponsorship? A. $825,991 B. $777,404 C. $728,816 D. $485,877
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