Expansion of its product line


Question: A company is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,950,000 and the project would generate incremental after-tax cash flows of $450,000 per year for six years. The appropriate required rate of return is 9 percent.

1. Calculate the NPV

2. Should project be accepted?

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Finance Basics: Expansion of its product line
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