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    Time Value of Money

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    Minnesota Metal Forming Company has just invested $500,000 of fixed capital in a manufacturing process, which is estimated to generate an after-tax annual cash flow of $200,000 in each of the next 5 years. At the end of year 5, no further market for the product and no salvage value for the manufacturing process is expected. If a manufacturing problem delays plant start-up for 1 year (leaving only 4 years of process life), what additional after-tax cash flow will be needed to maintain the same internal rate of return as would be experienced if no delay occurred?

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    Solution Preview

    Note: For the following answers the abbreviations have the following meanings

    PVIF= Present Value Interest Factor
    PVIFA= Present Value Interest Factor for an Annuity

    Minnesota Metal Forming Company has just invested $500,000 of fixed capital in a manufacturing process, which is estimated to generate an after-tax annual cash flow of $200,000 in each of the next 5 years. At the end of year 5, no further market for the product and no ...

    Solution Summary

    Calculates the value of additional after-tax cash flow.

    $2.19

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