Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:
Year Cash Flow
0 â$ 586,000
All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are âblockedâ and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 12 percent on this project.
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