Question 16 5 pts As corporate manager for acquisitions your

Question 16 5 pts As corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end of year 1, $1,000 at the end of year 2-seso at the end of year 3, and S2.800 at the end of Year 4 if the firm requires a minimum iRR or-hurdle rate\" of 10% for these types of investments, what is most you should pay for this project? Your answer should be between 2738.00 and 4355.00, rounded to 2 decimal places, with no special characters.

Solution

Cost of the project is the present value of cash flows. Year Cash flow Discount factor Present Value a b c=1.10^-a d=b*c 1 $           750 0.909091 $     681.82 2 $       1,000 0.826446 $     826.45 3 $           850 0.751315 $     638.62 4 $       2,800 0.683013 $ 1,912.44 Total $ 4,059.32 Thus, Amount to be paid $ 4,059.32