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1) A. The Ace Company is considering investing in a piece of property which costs $105,000. The property will return a constant cash flow forever. If the firm’s cost of capital is 9% and the

1) A.

The Ace Company is considering investing in a piece of property which costs $105,000. The property will return a constant cash flow forever. If the firm’s cost of capital is 9% and the corporate tax rate is over 40%, what is the minimum after-tax cash flow that would make the investment acceptable to Ace?

B. You are considering two projects. Project A is a five year project and project B is a 15 year project. The projects have normal cash flows and the same (positive) NVP at k=10%, which would have the higher NVP at 15%.

Project A

Project B

They would still be the same

d. More information is needed to determine

 

Jun 18 2021 View more View Less

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