Exam 7: Net Present Value and Other Investment Rules

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What is the net present value of a project that has an initial cash outflow of $12,670 and cash inflows of $2,400 a year for Years 1 and 2 and a final cash inflow in Year 6 of $15,400? The required return is 14.5 percent.

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Analysis using the profitability index:

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An investment is acceptable if its average accounting return (AAR):

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