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Try me corporation is contemplating investing in a project that will incur an initial investment of $1,000,000. The project has a useful and depreciable life of 5 years. The firm will depreciate the investment cost using a straight-line depreciation over its five-year life. The firm is in 25% marginal tax rate. The project is expected to produce a cash flow before depreciation and taxes of $350,000 per year throughout the life of the project. At the end of the life, the project will be sold for a price of $50,000. The firm's required rate of return for similar risk project is 14%. Based on the above information compute the following and determine under each criteria if the firm should accept the project.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92866418

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