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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:

  1. Compute ARR, payback period, and NPV.
  2. Discuss the feasibility of the investment.
Provide recommendations based on the analysis.

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