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ABC Co is planning to invest in an in-house operating system for mobile phones They have forecasted that with the new operating system the following are the expected cash flows that will be generate

ABC Co. is planning to invest in an in-house operating system for mobile phones. They have forecasted that with the new operating system the following are the expected cash flows that will be generated: -

This project will generate $10 million at the end of Year 1, which will grow at a rate of 6% p.a. for the next four years (i.e. from Year 1-2, 2-3, 3-4 and 4-5). Thereafter (i.e. Year 5 onwards), the growth rate in cash flows will stabilize to 2% per year until perpetuity.

If the discount rate is 10% what is the Present Value of the Cash Flows generated. (rounded to the nearest integer in million dollars).

 

Mar 01 2020 Read more Less More

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