(Solution) - A manager s favorite project requires an after tax cash outflow -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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A manager?s favorite project requires an after-tax cash outflow on January 1 of $10,000 and promises to return $2,500 of after-tax cash inflows at the end of each of the next five years. The after-tax cost of capital is 10 percent per year.
a. Use the net present value method to decide whether this favorite project is a good investment.
b. How much would the projected cash inflow for the end of Year 5 have to increase for the project to be acceptable?
c. How much would the projected cash inflow for the end of Year 5 have to increase for the project to have a net present value of $200?