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Your company is considering launching a new line of stoves. The manufacturing plant required for producing the new line of stoves costs $50,000,000 (today) and
Your company is considering launching a new
line of stoves. The manufacturing plant required for producing the new line of stoves
costs $50,000,000 (today) and will be depreciated down to zero over 20 years using
straight-line depreciation. The manufacturing plant will be sold for $6,000,000 at the
end of 10 years (the life of the project is 10 years). Net working capital increases by
$1,000,000 at the beginning of the project (year 0) and it is reduced back to its
original level in the final year of the project. The tax rate is 20 percent and the
discounting rate for the project is 10%. What is the initial outlay (Cash flow today)for
this project?
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