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* Tegami Inc. is a Japanese firm located in Kobe. The firm is considering building a new factory for JPY 1 0 5 , 0
Tegami Inc. is a Japanese firm located in Kobe. The firm is considering building a new factory for JPY This cost will be depreciated straightline to zero over the project's sixyear life, at the end of which the factory can be scrapped for JPY The firm's operation manager estimates that the firm can increase its annual operating revenues by JPY before tax. A setup of this new factory requires an initial investment in net working capital of JPY The firm's accountant also reports that the firm's marginal tax rate is percent. Suppose that the firm can only select either expanding to a new factory or redesign the old factory. The profitability index of redesigning the old factory is The firm's appropriate discount rate is percent. Calculate this plans protitability index and evaluate whether the firm shall expand into a new factory or not!
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