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A project requires equipment costing $2,000,000 and net working capital of $2,500,000. Revenues would increase by $2,800,000 and expenses would increase $1,200,000. The firm uses
- A project requires equipment costing $2,000,000 and net working capital of $2,500,000. Revenues would increase by $2,800,000 and expenses would increase $1,200,000. The firm uses MACRS depreciation, and the equipment qualifies as a 5 year asset. The project has an 8 year useful life. At the end of the projects life, you expect to be able to sell the equipment for $350,000. The tax rate is 40%, and cost of capital is 12%. Calculate the NPV, MIRR and Profitability Index. Is the project acceptable?
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