6:05 IMG_0742.jpg X Wildhorse Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $11.80 million. This investment will consist of $2.30 million for land and $9.50millian for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.30 million, which is $2.15 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, e.s. 15.25.) NPV $ The project should be
6:05 IMG_0742.jpg X Wildhorse Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $11.80 million. This investment will consist of $2.30 million for land and $9.50millian for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.30 million, which is $2.15 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, e.s. 15.25.) NPV $ The project should be
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Transcribed Image Text:6:05
IMG_0742.jpg
X
Wildhorse Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $11.80 million. This investment will consist of $2.30
million for land and $9.50millian for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.30 million, which
is $2.15 million above book value. The farm is expected to produce revenue of $2.00 million each year, and annual cash flow from operations equals $1.80 million. The marginal tax rate is 35
percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, e.s. 15.25.)
NPV $
The project should be
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