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Consider the project described below: Expected annual inflation rate 4% Cost of capital (real rate) 5% Corporate tax rate 30% Year 0 1 2 3
Consider the project described below: | ||||||||||
Expected annual inflation rate | 4% | |||||||||
Cost of capital (real rate) | 5% | |||||||||
Corporate tax rate | 30% | |||||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 | Notes | |||
Initial investment | 200,000.00 | |||||||||
Straight line depreciated to zero over 5 year life; Salvage value is zero | ||||||||||
Revenue | 80,000.00 | Increases at 8% per year in nominal terms | ||||||||
Variable costs | 20,000.00 | Increases at 6% per year in nominal terms | ||||||||
Fixed costs | 10,000.00 | Increases at 1% per year in real terms | ||||||||
Completed the highlighted cells and find the NPV for the project |
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