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Suppose ABC firm is considering an investment that would extend the life of one of its facilities for 5 years. The project would require upfront

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Suppose ABC firm is considering an investment that would extend the life of one of its facilities for 5 years. The project would require upfront costs of $8.7M plus $26.29M investment in equipment. The equipment will be obsolete in (N+2) years and will be depreciated via straight-line over that period (Assume that the equipment can't be sold). During the next 5 years, ABC expects annual sales of 73M per year from this facility. Material costs and operating expenses are expected to total 41 M and 8.45M, respectively, per year. ABC expects no net working capital requirements for the project, and it pays a tax rate of 44%. ABC has 67% of Equity and the remaining is in Debt. If the Cost of Equity and Debt are 16.04% and 5.26% respectively, Should they take the project? (Evaluate the project only for 5 years)

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