In analyzing a new potential business MacDonald Publishing's financial staff is estimating initial capital expenditure of $5 million. This equipment will be depreciated according to the MACRS 3 year class life and will have a market value of $1 million aftet four years. If MacDonald goes ahead with the new business, inventories and accounts payable will increase by $300,000 each. The new business is expected to have an economic life of four years and is expected to generate annual sales of $5 million and incur operating costs (excluding depreciation) of $3 million annually. If the company's tax rate is 40% and the required return in 10%, calculate the expected NPV of the new business.
In analyzing a new potential business MacDonald Publishing's financial staff is estimating initial capital expenditure of $5 million. This equipment will be
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