Question
Hi there, Assuming the following 1) the manufacturing plant has a ten- year tax life, and BHB uses diminishing value method depreciation for the plant
Hi there, Assuming the following 1) the manufacturing plant has a ten- year tax life, and BHB uses diminishing value method depreciation for the plant at 20% per annum. At the end of the project i.e, at the end of year 6, the plant can be scrapped for 71 million. 2) the project will incur 310 million per annum in fixed costs. 3) BHB will manufacture 420,000 washing machines per year and expects to sell them at an average price of $2,500 per washing machine. 4) The variable production costs are $1400 per washing machine. 5) at the end of year 6, the company will sell the land. The WACC is 6.9%. The projects initial cash flows (0) is $525,775,000. Tax rate is 28% Compute the projects Net present value, and Internal rate of return. Please show workings
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