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You are looking at project with a 10-year life. The initial investment is $150 million and is depreciable straight-line to a salvage value of $40
You are looking at project with a 10-year life. The initial investment is $150 million and is depreciable straight-line to a salvage value of $40 million and the after-tax operating income each year is $20 million. There are no capital maintenance or working capital requirements. The cost of capital for the company taking the project is 11% but this project is in a riskier business, with a cost of capital of 15%. The marginal tax rate is 40%. What is the correct NPV of this project?
a.
15.47
b.
11.36
c.
26.35
d.
9.22
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