Cullumber Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.15 million. This investment will consist of $2.00 million for land and $10.15 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 $5.20 million, which is $2.35 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.95 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. - NPV is? - The project should be accepted or rejected?
Cullumber Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.15 million. This investment will consist of $2.00 million for land and $10.15 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 $5.20 million, which is $2.35 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.95 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment.
- NPV is?
- The project should be accepted or rejected?
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