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MGF301 Assignment 4 (Summer 2010)

MGF301 Assignment 4 (Summer 2010) - ASSIGNMENT 4 MGF 301...

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ASSIGNMENT 4 MGF 301 Corporation Finance Summer 2010 You may work in a group of up to 4 on this Assignment. Please indicate clearly on all submitted Assignments who the members of the group are. Please note, all assignments submitted with more than 4 group members will automatically receive a 0 grade. This Assignment is due on Thursday, June 24th at the beginning of class. No late assignments will be accepted. If you will not be able to attend class that day, please submit it before hand by email or at my office, 346 Jacobs (put Assignments under the door if I am not there). ________________________________________________________________________________________________________ Answer all of the following questions. For each answer, show your work . 1. Suppose Peach Paving invests $4 million today (i.e., C 0 = -4,000,000) on a new construction project. The project is expected to generate annual cash flows of C 1 = -500,000; C 2 = 750,000 and then $1,000,000 in perpetuity for period C 3 and beyond. If the appropriate discount rate is 11% and management’s payback period cutoff is 5 years: (a) What is the payback period for the project? Show your work (b) What is the net present value of the project ?
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