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A company is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.076 million. The fixed asset will be depreciated
A company is considering a new 3-year expansion project that requires an initial fixed asset investment of $5.076 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $394,800. The project requires an initial investment in net working capital of $564,000. The project is estimated to generate $4,512,000 in annual sales, with costs of $1,804,800. The tax rate is 33 percent and the required return on the project is 18 percent. Calculate NPV and IRR of this project. Should the project be accepted or rejected
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