51.
Initial investment = $12,300,000
N = 10 years
Annual cash flow = $1,100,000
Salvage value = $6,700,000
WACC = 10.61%
PV factor $1 annuity for period n and discount rate r = (1 - 1/ (1+ r) ^n) / r
PV factor of $1 for period n and discount rate r = 1/ (1 + r) ^n
NPV = PV of annual cash flows + PV of salvage value - Initial investment
= $1,100,000 * (1 - 1/ (1+ r) ^n) / r + $6,700,000 * 1/ (1 + r) ^n - $12,300,000
= $1,100,000 * (1 - 1 / (1+ 10.61%) ^10)/ 10.61% + $6,700,000 * 1/ (1 + 10.61%)^10 - $12,300,000
= - $3270358.45
NPV = -$3.27 million
NPV is negative. so reject the Project.
Correct answer is Option d.
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