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You are evaluating a decision to build a new factory based on a strong economy and therefore expected future growth. The expansion will cost $10.5
You are evaluating a decision to build a new factory based on a strong economy and therefore expected future growth. The expansion will cost $10.5 million, with expected sales of $6 million per year. Variable costs of running the factory amount to 45% of sales and fixed costs equal $1.5 million. Initial NWC needs are $1.295 million. At the end of eight years, you expect to sell the factory for $3 million. The tax rate is 22% and cost of capital is 7.80%.
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