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Data Corp needs to buy new equipment to pursue new business lines in order to increase its value. The company has two options: Expected Main.
Data Corp needs to buy new equipment to pursue new business lines in order to increase its value. The company has two options: Expected Main. Costs Expected Salvage Option Investment Rev (per yr) (per yr) Life (yrs) Value Initial 6,000 13,000 3,000 2,100 15,000 20,000 6,000 5,000 13 Also assume Option B will get a tax rebate of $2,000 in year 4 and $1,500 in year 8. Data Corp has a beta of 1.2, the risk free-rate is 3% and the market risk premium is 8%. A. Calculate the IRR and NPV of each option (10 points) B. Which strategic decision should Data Corp make? Why? (10 points)
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