You are considering a project with the following financial data: Required initial investment at n = 0: $50M Project life: 10 years Estimated annual revenue: $X (unknown) Estimated annual operating cost: $15M Required minimum return 20% per year Salvage value of the project: 15% of the initial investment What is the minimum annual revenue (in $M) must be generated to make the project worthwile? a. X = 26.64 M b. X = 32.47 M c. X = 28.38 M d. X = 35.22 M
You are considering a project with the following financial data: Required initial investment at n = 0: $50M Project life: 10 years Estimated annual revenue: $X (unknown) Estimated annual operating cost: $15M Required minimum return 20% per year Salvage value of the project: 15% of the initial investment What is the minimum annual revenue (in $M) must be generated to make the project worthwile? a. X = 26.64 M b. X = 32.47 M c. X = 28.38 M d. X = 35.22 M
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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You are considering a project with the following financial data:
Required initial investment at n = 0:
$50M Project life: 10 years
Estimated annual revenue: $X (unknown)
Estimated annual operating cost: $15M
Required minimum return 20% per year
Salvage value of the project: 15% of the initial investment
What is the minimum annual revenue (in $M) must be generated to make the project worthwile?
a. X = 26.64 M b. X = 32.47 M c. X = 28.38 M d. X = 35.22 M
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