Buxton Community is expecting its new dialysis unit to generate the following cash flows:
|
Givens
|
Years
|
0
|
1
|
2
|
3
|
4
|
5
|
|
Initial investment
|
|
(10,000,000)
|
|
|
|
|
|
|
Net Operating Cash flows
|
|
|
1,500,000
|
2,000,000
|
4,000,000
|
7,000,000
|
14,000,000
|
a. Determine the payback for the new dialysis unit
b. Determine the NPV using a cost of capital of 11%
c. Determine the NPV at cost of capital of 20% and compute the IRR
d. At an 11% cost of capital, should the project be accepted?
At a 20% cost of capital, should the project be accepted? Explain.