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    Cash flow scenarios NPV and IRR

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    Initial investment outlay of $20 million for equipment only
    Project and equipment life: 5 years
    Sales projected to be $12 million per for 5 years
    Assume gross margin of 50% (exclusive of depreciation)
    Depreciation: straight-line for tax purposes
    Selling, general and administrative expenses: 10% of sales
    Tax rate: 35%
    Solve for NPV and IRR.

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    Solution Summary

    The tutorial with instructional notes is attached in excel. Click in cells to see computation. You do not specify a required rate of return or cost of capital. I assumed 8% but the model will update if you change this rate (see yellow cell).