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Tesla, Inc. is evaluating the construction of a new manufacturing plant. The project requires an initial outlay of $15,000,000 and is expected to produce the

Tesla, Inc. is evaluating the construction of a new manufacturing plant. The project requires an initial outlay of $15,000,000 and is expected to produce the following annual cash inflows:

Year12345678910
Cash Inflows ($)2,000,0002,100,0002,200,0002,300,0002,400,0002,500,0002,600,0002,700,0002,800,0002,900,000

The discount rate for the project is 9%. The plant has a residual value of $1,000,000 at the end of its 10-year life. The corporate tax rate is 25%.

Required:

  1. Calculate the net present value (NPV) of the project.
  2. Compute the internal rate of return (IRR).
  3. Determine the discounted payback period.
  4. Assess the impact of the residual value on the project's NPV.
  5. Evaluate the sensitivity of the project's NPV to changes in the discount rate.

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