Cullumber Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial Inve of $12.05 million. This investment will consist of $2.45 million for land and $9.60 million for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.15 million, which is $2.10 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.95 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, e.g. 15.25.) NPV $

Cullumber Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial Inve of $12.05 million. This investment will consist of $2.45 million for land and $9.60 million for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5.15 million, which is $2.10 million above book value. The farm is expected to produce revenue of $2.05 million each year, and annual cash flow from operations equals $1.95 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Do not round factor values. Round final answer to 2 decimal places, e.g. 15.25.) NPV $

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Description: Current Attempt in ProgressCullumber Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investmentof $12.05 million. This investment will consist of $2.45 million for land and $9.60 milli

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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