Question
A new factory requires an initial outlay of $4.85 million to be paid immediately.The factory will last for twenty additional years, after which it can
A new factory requires an initial outlay of $4.85 million to be paid immediately.The factory will last for twenty additional years, after which it can be sold for a salvage value of $1,000,000.Sales will be $800,000 during the first year of operation and will grow at a rate of 6 percent a year after that. Variable costs will be 25 percent of sales and fixed costs will be $165,000 and grow at a rate of 5% per year. All costs are in cash and there are not taxes paid to the government. Assume cash flows occur at year-end. At a 7 percent required return - the net present value of this project and is __________.
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