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The most likely outcomes for a particular project are estimated as follows: xcluding depreciation) However, you recognize that some of these estimates are subject to
The most likely outcomes for a particular project are estimated as follows: xcluding depreciation) However, you recognize that some of these estimates are subject to error. Suppose that each variable may turn out to be either 10% higher or 10% lower than the initial estimate. The project will last for 10 years and requires an initial investment of $1,000,000, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 40% and the required rate of return is 12%. a. What is project NPV in the "best case" scenario, that is, assuming all variables take on the best possible value? [ 10 marks]
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