If the interest rate considered is 10% per year, will you accept the project under the net present value (NPV) rule in capital budgeting?

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n expansion project that has an initial investment of $10 million has the following cash flows at the end of each year for the next 2 years as shown in the table below. If the interest rate considered is 10% per year, will you accept the project under the net present value (NPV) rule in capital budgeting?

Year 1 Year 2 Terminal Cash Flow Year 2
$5 million $5 million $1 million

 

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