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please show all calculations on another page 2. Your company is considering the purchase of a new production system with an installed cost of $2,500,000.
please show all calculations on another page
2. Your company is considering the purchase of a new production system with an installed cost of $2,500,000. The cost will be depreciated on a straight-line basis to zero over the seven- year life of the project, and the system can be sold at the end of the project for $500,000. It will provide additional revenue of $1,300,000 in the first year, and the additional revenue is expected to grow 6% per year thereafter. The associated cost of goods sold is estimated to be 40% of revenue, and other operating expenses are estimated to be 21% of revenue. The project will also require an initial working capital investment of $400,000, which will be recovered at the end of the project. If the tax rate is 25% and the required rate of return is 10%, what is the NPV of this project Step by Step Solution
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