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Each widget will be sold for $ 1 , 2 0 0 . Variable costs per widget are $ 8 0 0 , and fixed

Each widget will be sold for $1,200. Variable costs per widget are $800, and fixed costs are $1,300,000 per year. Assume all costs will occur at the beginning of the year and the revenues will occur at the end of the year (e.g. variable costs and fixed costs for 10,000 widgets for year 1 will occur at year 0). Start up costs include $1,000,000 of fully deductible expense at year 0, $2,000,000 for the building (CCA rate 5%), $3,000,000 for the equipment (CCA rate 30%), and $2,000,000 for land. Net working capital each year will be equal to 20% of the sales of the following year. Any remaining net working capital will be fully recovered at the end of the 5 th year.At the end of 5 years the buildng will be sold for $1,500,000, equipment for $1,000,000, and land for $2,000,000. LTM is an ongoing profitable business and pays taxes at a rate of 40%, and uses a discount rate of 12%. Assume asset pool will remain open. Determine NPV.

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