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Task1. Nevada Enterprises is considering purchasing a vacant lot that sells for $1.3 million. When the property is purchased, the company's plan is to spend another $5 million today (t = 0) to build a hotel on property. The cash flows from the hotel will depend critically on whether the state imposes a tourism tax in this year's legislative session. When the tax is imposed, the hotel is anticipated to produce cash inflows of $500,000 at the end of each of the upcoming 15 years. When the tax is not imposed, the hotel is anticipated to produce cash inflows of $1,300,000 at the end of each of the next 15 years. The project has a 12% WACC. Suppose at the outset that the company doesn’t have the option to delay the project. prepare out your answers for parts a, b, c and e completely. For instance, 13 million must be entered as 13,000,000.

A. What is the project's anticipated NPV if the tax is imposed?

B. What is the project's anticipated NPV if the tax is not imposed?

Financial Accounting, Accounting

  • Category:- Financial Accounting
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