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FinanceQ&A LibraryArcher Daniels Midland company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12 million. This investment will consist of $2 million for land and $10 million 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 million, which is $2million above book value. The farm is expected to produce revenue of $2 million each year, and annual cash flow from operations equals $1.8 million. The marginal tax rate is 35%, and the appropriate discount rate is 10%. Calculate the NPV of this investmentStart your trial now! First week only $4.99!*arrow_forward*

Question

Archer Daniels Midland company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial | |||

investment of $12 million. This investment will consist of $2 million for land and $10 million 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 million, which is $2million above | |||

book value. The farm is expected to produce revenue of $2 million each year, and annual cash flow from operations equals $1.8 million. | |||

The marginal tax rate is 35%, and the appropriate discount rate is 10%. Calculate the NPV of this investment |

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