16. Firm W has the opportunity to invest $150,000 in a new venture. The projected cash flows from the venture are as follows: Initial investment After-tax cash flow Return of investment Net cash flow Year 0 $(150,000) $(150,000) Determine if Firm W should make the investment, assuming that: Year 1 $5,000 $5,000 Year 2 $8,000 $8,000 Year 3 $ 10,000 150,000 $160,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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16. Firm W has the opportunity to invest $150,000 in a new venture. The projected cash flows from the venture are
as follows:
Initial investment
After-tax cash flow
Return of investment
Net cash flow
Year 0
$(150,000)
$(150,000)
Determine if Firm W should make the investment, assuming that:
a. It uses a 6 percent discount rate to compute NPV.
b. It uses a 3 percent discount rate to compute NPV.
Year 1
$5,000
$5,000
Year 2
$8,000
$8,000
Year 3
$ 10,000
150,000
$160,000
Transcribed Image Text:16. Firm W has the opportunity to invest $150,000 in a new venture. The projected cash flows from the venture are as follows: Initial investment After-tax cash flow Return of investment Net cash flow Year 0 $(150,000) $(150,000) Determine if Firm W should make the investment, assuming that: a. It uses a 6 percent discount rate to compute NPV. b. It uses a 3 percent discount rate to compute NPV. Year 1 $5,000 $5,000 Year 2 $8,000 $8,000 Year 3 $ 10,000 150,000 $160,000
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