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Problem:

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.10 million. This investment will consist of $2.30 million for land and $9.80 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.09 million, $2.33 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.92 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent.

Required:

Question: Calculate the NPV of this investment.

Note: Please show how to work it out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91148058

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