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Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The company expects the proj...

Strange Manufacturing Company is purchasing a production facility at a cost of $21 million. The company expects the project to generate annual cash flows of $7 million over the next five years. Its cost of capital is 18 percent. What is the net present value of this project? (Round to the nearest dollar)

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Answer #1

We see that the net present value of the project is given as equal to=-21+7/18%*(1-1/1.18^5)=$0.89019715 million or $890197.15

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