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The following information is available about an investment opportunity. Investment will occur at time 0 and sales will commence at time

1. Initial cost$28 million

Unit sales 400,000

Selling price per unit, this year$60.00

Variable cost per unit, this year$42.00

Life expectancy 8 years

Salvage value$0

Depreciation Straight-line

Tax rate37%

Nominal discount rate10.0%

Real discount rate10.0%

Inflation rate0.0%

a. Prepare a spreadsheet to estimate the project's annual after-tax cashflows.

b. find out the investment's internal rate of return and its NPV.

c. How do your answers to problems (a) and (b) change when you assume a uniform inflation rate of 8 percent a year over the next10years?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M946454

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