Please correct answer and don't use hand raiting Forest Enterprises, Incorporated, has been considering the purchase of a new manufacturingfacility for $273,000. The facility is to be fully depreciated on a straight-line basis over sevenyears. It is expected to have no resale value after the seven years. Operating revenues fromthe facility are expected to be $108,000, in nominal terms, at the end of the first year. Therevenues are expected to increase at the inflation rate of 3 percent. Production costs at theend of the first year will be $33,000, in nominal terms, and they are expected to increase at 4percent per year. The real discount rate is 6 percent. The corporate tax rate is 23 percent.Calculate the NPV of the project.Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.

First, annual depreciation = $273,000 ÷ 7 = $39,000For each year, we'll calculate:Revenue: Starts at…

Answered: Forest Enterprises, Incorporated, has…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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