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Year 0 Years 1-10 -15 Investment Sales Variable Costs Fixed Costs Depreciation Pretax profit Taxes @ 50% Profit after tax Operating cash flow Net Cash

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Year 0 Years 1-10 -15 Investment Sales Variable Costs Fixed Costs Depreciation Pretax profit Taxes @ 50% Profit after tax Operating cash flow Net Cash Flow 37.5 30 3 1.5 3 1.5 1.5 3.0 3 -15 Otobai Co. is considering investing in a project. The following table shows the expected values of the relevant variables of the project. For simplicity, let's assume that all the numbers are in US dollars. Discount rate r = 10%. A 10% increase in oil price is likely to increase Otobai's fixed costs by 20%. Everything else remains unchanged, what would be the annual cash flow from Year 1 through Year 10? (0) (25) $ 1.2 $2.4 $2.7 None of the rest is correct

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