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The CEO of a company asked you to analyze the possibility of acquiring a smaller business operation from another company. The purchase will cost $72

The CEO of a company asked you to analyze the possibility of acquiring a smaller business operation from another company. The purchase will cost $72 million in year zero and will also require $3 million of net working capital. The company is using MACRS 3-year depreciation and a book value is $8 million. Assume you can sell the business in 4 years for $13 million. The new business operation will generate $72 million in revenue each year which will take $41 million in costs annually. Use the 21% marginal tax rate and 11% cost of capital. Compute the cash flows and depreciation for the project.

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