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sa Five Stars Inc., is considering a new four - year expansion project that requires an initial fixed asset investment of 4 . 5 million.

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Five Stars Inc., is considering a new four-year expansion project that requires an initial fixed asset investment of 4.5 million. The fixed asset will be depreciated straight-line to zero over its four-year tax life. However, the fixed asset will have a market value of $310,000 at the end of the project. The project is estimated to sell the new product for 10,000 units a year and the price per unit is $265. The variable cost is $84 per unit and the fixed cost is $80,000 a year. Suppose the project requires an initial investment in net working capital of $300,000 and the net working capital will be fully recovered at the end of the project. If the tax rate is 21% and the required rate of return on the project is 12%, what is the projects NPV?

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