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Cost of new equipment $500,000 Annual depreciation $ 90,000 Working capital required $100,000 Annual (cash) revenue (for 5 years) $260,000 Annual (cash) expenses (for 5

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Cost of new equipment $500,000 Annual depreciation $ 90,000 Working capital required $100,000 Annual (cash) revenue (for 5 years) $260,000 Annual (cash) expenses (for 5 years) $125,000 Cost to upgrade equipment in 3 years' $ 20,000 Salvage value of equipment in 5 years $ 50,000 The length of the project is 5 years, after which the working capital will be released for investment elsewhere in the company and the equipment will be sold for its salvage value. Assuming the company's required rate of return is 6%, what is the NPV of this project? You can solve the problem using either of the methods discussed on Wednesday: Identifying the present value of each relevant item by applying PV $ and/or PVA factors as appropriate, Identifying the net cash flows for each year and applying PV $ factors. OR

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