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Tires Co wants to buy a business that produces tires. The cost of purchasing is $50 millions, the business is projected to generate yearly revenues
Tires Co wants to buy a business that produces tires. The cost of purchasing is $50 millions, the business is projected to generate yearly revenues for 15 millions. Direct manufacturing costs are expected to be $1,250,000 a year and other fixed cost would be somewhere near $350,000 a year. The company expects to pay $800000 in taxes every year. They plan to keep the business for 12 years and then resell it at $ 25 millions. The MARR used by Tennis Co is 15%. Table all the cash flows and answer the following: 1. What is the payback period for the investment? 2. What is the discounted payback period for the investment 3. Is the investment worth of being pursued? 4. At what MARR the company would be indifferent to this investment
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