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the course is called farm management 1. A farmer in mufulira, copper belt province of Zambia would like to introduce a new product it has
the course is called farm management
1. A farmer in mufulira, copper belt province of Zambia would like to introduce a new product it has estimated that the cost of purchasing, delivery and installation the new machine required to manufacture the product is k160,000.the expected life span of the product is six years. The first revenues 200,000 second 240,000 and 220,000 , Revenues estimates are k205,000 in each of the remaining three years. The incremental variable of producing the product are estimated to be 54% of the revenues. The marginal tax rate of the farm is 40% of the revenues. The machine purchased will have a salvage value of k35,000 and the farm is expecting to recoup k10,000 of its working capital at the end of six years. The farm has fixed cost of k30,000. a. Construct a table summarizing the net cash flows of the farm. b. Calculate the net present value of the project if the farm uses a risk discount rate of 20% c. Should the farm undertake the project, if so by how much value of the farm increase d. Calculate the IRR at a discount rate of your choiceStep by Step Solution
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