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At the end of October 2023, you signed a contract as a financial analyst and consultant at Summa Watch Company, a smartwatch manufacturer. The company
At the end of October 2023, you signed a contract as a financial analyst and consultant at Summa Watch Company, a smartwatch manufacturer. The company plans to expand its business by purchasing land for IDR 150,000,000,000 to open tenants in many branches. The company's valuation of the land they purchased is IDR 145,000,000,000, which in 2027 is predicted to be sold for IDR 175,000,000,000. However, due to the large number of competitors, the company plans to moderate the expansion by involving market analysts and economic analysts who are not in your field by paying a fee of IDR 150,000,000, which predicts that the sales you can make for the smartwatch are as follows: with the assumption that the selling price is adjusted to the upper limit price on the market of IDR 1,000,000 with a gross profit margin of 70%. Analysts consider that after 2027 , there will be much uncertainty, so it is best to stop it to avoid losses. Summa Watch Company estimated that the fixed cost for the sale was IDR 3,750,000,000. The machine used to produce the smartwatch is Rp.3,000,000,000 can be depreciated over three years and sold after Rp1,500,000,000. In addition, it is known that the Net Working Capital required is IDR 150,000,000, with the tax rate is 30% and the required return on the project being 15%. What is the NPV of the project? Should it accept the project? (complete the answer using cash flow projections)
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