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scrowe7
Group Title
Wheel Industries is considering a threeyear expansion project.
The project requires an initial investment of $1.5 million. The project will use straightline depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year and has annual costs of $600,000.
The tax rate is 35 percent. Calculate the cash flows for the project. If the discount rate were 6 percent, calculate the NPV of the project, then offer your thoughts as to whether this is an economically acceptable project to undertake.
Clinton Co. has jus
 one year ago
 one year ago
scrowe7 Group Title
Wheel Industries is considering a threeyear expansion project. The project requires an initial investment of $1.5 million. The project will use straightline depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year and has annual costs of $600,000. The tax rate is 35 percent. Calculate the cash flows for the project. If the discount rate were 6 percent, calculate the NPV of the project, then offer your thoughts as to whether this is an economically acceptable project to undertake. Clinton Co. has jus
 one year ago
 one year ago

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killerapp7 Group TitleBest ResponseYou've already chosen the best response.0
After tax cash flow per year = (1,200,000  600,000) * (10.35) = 390,000 Value of the project = (390,000) / 0.06 = $6,500,000 NPV = 6,500,000  1,500,000 = $5,000,000
 one year ago

fresh88 Group TitleBest ResponseYou've already chosen the best response.0
The npv would be 390/1.06 + 390/1.06^2 + 390/1.06^3
 one year ago
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