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Cash flows are forecasted on a project. It uses internal rate of return rule to accept or reject projects. Should

Cash flows are forecasted on a project. It uses internal rate of return rule to accept or reject projects. Should this project be accepted if the required rate of return is 12%.

Co = -10,000; C1=0, C2 = +7,500; C3= +8,500.

In addition to the answer can you provide the formula?


SOLUTION PREVIEW
 
Year     CF                    PV factor @12%         Present Value   PV factor @22% Present value
0-         10,000             1                                  -10000             1                                  -10000
1          0                      0.893                           0                      0.82                             0
2          7,500               0.797                           5977.5             0.672                           5040

 
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