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Facebook is analyzing a $3,500,000 capital investment with the following data: Initial Investment: $3,500,000 Depreciation @ 20%: $700,000/year Book Value at Year-End: $2,800,000, $2,100,000, $1,400,000,
Facebook is analyzing a $3,500,000 capital investment with the following data:
- Initial Investment: $3,500,000
- Depreciation @ 20%: $700,000/year
- Book Value at Year-End: $2,800,000, $2,100,000, $1,400,000, $700,000, $0
- Cash Flows: $800,000, $900,000, $800,000, $700,000, $600,000
- Profits: $100,000, $200,000, $100,000, $0, $-100,000
- ARR: 2.86%, 9.52%, 4.76%, 0%, -2.86%
- Average Profits: $60,000
- Average Investment: $1,750,000
- Average ARR: 3.43%
- Payback: 4.4 years
- NPV @ 10%: $180,000
Requirements:
- Compute ARR, payback period, and NPV.
- Discuss the feasibility of the investment.
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