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Tesla is assessing a $1,500,000 investment opportunity. The financial projections include: Initial Investment: $1,500,000 Depreciation @ 12%: $180,000/year Book Values at Year-End: $1,320,000, $1,140,000, $960,000,
Tesla is assessing a $1,500,000 investment opportunity. The financial projections include:
- Initial Investment: $1,500,000
- Depreciation @ 12%: $180,000/year
- Book Values at Year-End: $1,320,000, $1,140,000, $960,000, $780,000, $600,000, $420,000, $240,000, $60,000, $0
- Cash Flows: $250,000, $300,000, $200,000, $150,000, $100,000, $80,000, $70,000, $60,000, $50,000
- Profits: $70,000, $120,000, $20,000, $0, $-50,000, $-70,000, $-90,000, $-100,000
- ARR: 4.67%, 8%, 1.33%, 0%, -3.33%, -4.67%, -6%, -6.67%
- Average Profits: $-12,000
- Average Investment: $900,000
- Average ARR: -1.33%
- Payback: 5.6 years
- NPV @ 10%: $45,000
Requirements:
- Calculate the ARR, payback period, and NPV for Tesla's investment.
- Assess the investment's profitability.
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