10 years for a price of $5 million, which is $2.40 million abov book value. The farm is expected to produce revenue of $2.10 million each year, and annual cash flow from operations equals $2.00 million. The marginal tax rate is 25 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, eg. 5,275.25.) NPV $
10 years for a price of $5 million, which is $2.40 million abov book value. The farm is expected to produce revenue of $2.10 million each year, and annual cash flow from operations equals $2.00 million. The marginal tax rate is 25 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, eg. 5,275.25.) NPV $
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Pharoah Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of
$12.05 million. This investment will consist of $2.90 million for land and $9.15 million for trucks and other equipment. The land, all
trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.30 million, which is $2.40 million above
book value. The farm is expected to produce revenue of $2.10 million each year, and annual cash flow from operations equals $2.00
million. The marginal tax rate is 25 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Do
not round factor values. Round final answer to 2 decimal places, eg. 5,275.25.)
NPV
The project should be
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