Question
In: Finance
Dixon Weed Seeds Inc. is considering expanding. An outlay of $205 million is required for equipment...
Dixon Weed Seeds Inc. is considering expanding. An outlay of $205 million is required for equipment for the expansion, and additional net working capital of $23 million is required to support the expansion. The equipment is expected to have a productive life of 10 years, and will be depreciated over 10 years to $19.04 million. It is expected to be sold at the end of its life for $24.6 million. Revenues minus expenses are expected to be $44.834 million per year for the life of the equipment. The corporation's marginal tax rate is 24% and the cost of capital for this investment is 10.3%. Compute the NPV of Dixon's proposed expansion. (In $millions with 3 decimals.)
Solutions
Expert Solution
NPV = Total Discounted Cash inflow - Total Discounted Cash outflow
= 251.630 - 228.00
= $23.63 million
Note:
where n = number of periods
i = rate of return / cost of capital
for example, in year 1:
In year 2:
and so on....
jeff jeffy answered 1 month agoRelated Solutions
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