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freezo1994 freezo1994
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3 weeks ago
A firm is considering a project that requires an initial cash outflow of $1,000,000 for the purchase of a capital asset, which has an eight-year life and a CCA rate of 20%, with the asset class remaining open and the half-year rule applying in the first year. The expected salvage value of the asset is $75,000 at the end of eight years. The project will generate sales revenue of $450,000 in the first year, which will grow at 5% per year in the subsequent years. Variable costs will be $200,000 for the first year, which will also grow at 5% per year. The firm's marginal tax rate is 40% and required return is 12%. What is the project's NPV?

▸ $1,402,183

▸ $123,498

▸ $1,509,326

▸ $166,707
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
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ordinarykathyordinarykathy
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