10. Fijisawa, Inc., is considering a major expansion of its product line and has
ID: 2667714 • Letter: 1
Question
10. Fijisawa, Inc., is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,950,000, and the project would generate free cash flows of $450,000 per year for six years. The appropriate required rate of return is 9 percent.a. Calculate the net present value.
b. Calculate the profitability index.
c. Calculate the internal rate of return.
d. Should this project be accepted
Explanation / Answer
10. Fijisawa, Inc., is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,950,000, and the project would generate free cash flows of $450,000 per year for six years. The appropriate required rate of return is 9 percent.
a. Calculate the net present value.
NPV= 68729
b. Calculate the profitability index.
1.035
Calculate the internal rateof return.
Internal rateof return.=10.42%
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