NPV and IRR of the Project
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Your company needs to launch a new production facility to reach its strategic goals.
The new facility will cost $15 million to acquire. The company will use it for 35 years, at which time the company expects to sell the facility for $1.2 million.
The product from the new facility is expected to generate year-end net cash inflows of $3.2 million during every year of its 35-year life.
Compute the NPV and IRR of the project. For your NPV calculations, assume a cost of capital of 15 percent.
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Solution Summary
This solution calculates the NPV and IRR of the project with step-by-step calculations using variables of annual payment, interest rate, and FV.
Solution Preview
By a financial calculator, we input:
FV = 1.2
Annual payment = 3.2
N = ...
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