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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Net Present Value, Basic Concepts
For discount factors use Exhibit 14B-1 and Exhibit 14B-2. PLEASE LOOK AT BOTTOM THEY ARE ATTACHED THERE.
Wise Company is considering an investment that requires an outlay of $600,000 and promises an after-tax cash inflow 1 year from now of $752,500. The company's cost of capital is 10%.
Required:
1. Break the $752,500 future cash inflow into three components: (a) the return of the original investment, (b) the cost of capital, and (c) the profit earned on the investment. Now compute the present value of the profit earned on the investment. If required, round your answers to the nearest dollar.

2. Conceptual Connection: Compute the NPV of the investment. Round your intermediate calculations and final answer to the nearest dollar.



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