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Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will...

Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will require an initial investment of $ 3.2$ million in net working capital today. The plant will last ten​ years, at which point the full investment in net working capital will be recovered. Given an annual discount rate of 5 % what is the net present value of this working capital​ investment? The NPV of this working capital investment is ​$nothingm. ​(Round to the nearest​ dollar.)

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Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=3,200,000/1.05^10

=3,200,000*0.613913253

=$1,964,522.41

NPV=Present value of inflows-Present value of outflows

=$1,964,522.41-3,200.000

which is equal to

=($1,235,478)(Approx)(Negative).

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