Rare Agri-Products Ltd. is considering a new project with a projected life of seven (7) years. The project falls under the government’s subsidy program for encouraging local agricultural products and is eligible for a one-time rebate of 25% on any initial equipment installed for the project. The initial equipment (IE) will cost $41,000,000. An additional equipment (AE) costing $3,500,000 will be needed at the end of year 3. At the end of seven (7) years, the original equipment, IE, will have no resale value but the supplementary equipment, AE, can be sold for $50,000. A working capital of $1,350,000 will be needed. Question: What is the initial investment required
Rare Agri-Products Ltd. is considering a new project with a projected life of seven (7) years. The project falls under the government’s subsidy program for encouraging local agricultural products and is eligible for a one-time rebate of 25% on any initial equipment installed for the project. The initial equipment (IE) will cost $41,000,000. An additional equipment (AE) costing $3,500,000 will be needed at the end of year 3. At the end of seven (7) years, the original equipment, IE, will have no resale value but the supplementary equipment, AE, can be sold for $50,000. A working capital of $1,350,000 will be needed. Question: What is the initial investment required
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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Rare Agri-Products Ltd. is considering a new project with a projected
life of seven (7) years. The project falls under the government’s
subsidy program for encouraging local agricultural products and is
eligible for a one-time rebate of 25% on any initial equipment
installed for the project. The initial equipment (IE) will cost
$41,000,000. An additional equipment (AE) costing
$3,500,000 will be needed at the end of year 3. At the end of seven
(7) years, the original equipment, IE, will have no resale value but
the supplementary equipment, AE, can be sold for $50,000. A working
capital of $1,350,000 will be needed.
Question:
What is the initial investment required
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