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Compute NPV and IRR for the following project. Assume a cost of capital of 16.5%. Recommend...

Compute NPV and IRR for the following project. Assume a cost of capital of 16.5%. Recommend or reject this project and justify your recommendation.

Project Initial Capital Cost                  $100,000

Project Life                             5 Years

Annual Revenue                      $ 32,000

Annual Operating Cost             $   8,000

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Answer #1

The project should be rejected as NPV is negative, even if IRR is positive.

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