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As the CFO of Forever New, you have gathered the financial estimates shown in the table below and you are required to assess the
As the CFO of Forever New, you have gathered the financial estimates shown in the table below and you are required to assess the potential value created from the new store project. Forever New New Store Project (Amounts given in $ thousands) Fiscal year Incremental Revenue Incremental Cost Incremental Profit Incremental Profit x (1 - Tax Rate) Capital Expenditure Change in NWC Depreciation Tax Shield (Tax Rate x Depreciation) Recovery of Net Working Capital (cash inflow) 2020 2021 2022 2023 2024 1,100.00 500.00 512.00 522.00 554.00 150.00 154.00 167.00 177.00 25.00 60.00 80.00 35.00 2025 350.00 358.00 355.00 377.00 230.65 235.922 233.945 248.443 249.102 64.20 64.20 67.80 72.60 543.00 165.00 378.00 72.60 41.00 If the marginal tax rate is 34.1%, what is the NPV in Year 2020 of the new store project assuming a cost of capital of 16.7%?
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