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BP Oil is in the process of replacing sections of its Prudhoe Bay, Alaska oil transit pipeline. This will reduce corrosion problems, while allowing higher
BP Oil is in the process of replacing sections of its Prudhoe Bay, Alaska oil transit pipeline. This will reduce corrosion problems, while allowing higher line pressures and flow rates to downstream processing facilities. The installed cost is expected to be about $170 million. Alaska imposes a 22.5% tax on annual profits (net revenue over costs), which are estimated to average $85 million per year for a 20-year period. Use tabulated factors and a spreadsheet to answer the following: (a) At a corporate MARR of 10% per year, does the project AW indicate it will make at least the MARR? (b) Recalculate the AW at MARR values increasing by 10% per year, that is, 20%, 30%, etc. At what required return does the project become financially unacceptable
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