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regina nana regina nana
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4 years ago
A convenience store owner is contemplating putting a large neon sign over his store. It would cost $50,000, but is expected to bring an additional $24,000 of profit to the store every year for five years. Would this project be worthwhile if evaluated using a payback period of two years or less and if the cost of capital is 10%?

▸ Yes, since the cash flows after two years are greater than the initial investment.

▸ Yes, since the value of the cash flows into the store, in present dollars, are greater than the initial investment.

▸ Yes, since it will pay back its initial investment in two years.

▸ No, since the value of the cash flows over the first two years are less than the initial investment.
Textbook 
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance


Edition: 2nd
Authors:
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christinaalexchristinaalex
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4 years ago
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