i. Assume the end-of-year seven cash flow is 2 percent larger than the end-of-year-six cash flow. The cash flows will continue to grow in perpetuity at a constant rate of 2 percent thereafter.
ii. Assume the project can be liquidated at the end of year six (after receiving the end-of-year-six cash flow) to net an additional after-tax cash inflow of $80,000.
a. Calculate the project NPV assuming i.
b. Calculate the project NPV assuming ii.
c. Interpret your answers to a. and b. In your discussion, clarify how the assumptions must coincide with management decisions.
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