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A company has an investment project that will cost $2 million today and yield a payoff...

A company has an investment project that will cost $2 million today and yield a payoff of $3 million in 5 years. If the interest rate is 9%, should the firm undertake the project? Show evidence to support your answer

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Answer #1

Present Value ے Future Value (1+ Interest) Tirse = 30 1+(0.09) 30,00,000 1.53862 1949,799.17

Actual present value= $2,000,000

The present value is $1,949,799.17. Since the calculated present value for the firm is less than the actual present value. The firm should not undertake this project.

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