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Question: Assume the discount rate or weighted average cost of capital is 10%. Ignore taxes and depreciation.

A company wants to build a new factory for increased capacity. Using the Net Present Value (NPV) method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information:

- Building a new factory will increase capacity by 30%.

- The current capacity is $10 million of sales with a 5% profit margin.

- The factory costs $10 million to build.

- The new capacity will meet the company's needs for 10 years.

- The factory is worth $14 million over 10 years.

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Category:- Basic Finance
Reference No.:- M92775270

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