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Can you please show full calculation steps and full answers including intermediate stages The Good company considers investing in a new production line, for product2.
Can you please show full calculation steps and full answers including intermediate stages
The Good company considers investing in a new production line, for product2". The initial investment is 2 500 000,00 and the lifetime of the production line is 7 years. Product2 is expected to sell at 95/piece, and its material costs are calculated at 55/piece. Initial sales at year 1 are expected to be at 15000 pieces, after which they will grow by 20% each year the following 3 years. The final year, the sales will drop by 50% due to the planned introduction of a substituting product. The production line will generate additional expenses that have been calculated at 120 000,00/year. The weighted average cost of capital in the Good company is 10%. Corporate tax is at 20%, and prices are excluding VAT. a) Calculate the NPV of the investment b) Which year will the investment have paid itself back? c) What is the internal rate of return of the investmentStep by Step Solution
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