Calculate the npv of investment

Assignment Help Financial Management

Reference no: EM131896594

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12 million. This investment will consist of $2 million for land and $10 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5 million, $2 million above book value. The farm is expected to produce revenue of $2 million each year, and annual cash flow from operations equals $1.8 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment.

Reference no: EM131896594

Questions Cloud

Calculate duration and convexity of ten year treasury note : Calculate the duration and convexity of a 10-year Treasury note with a 4% coupon, trading at 99:8. Use a 20 basis point shock for the calculation.

What is the pre-tax cost of debt for the newly-issued bonds : What is the pre-tax cost of debt for the newly-issued bonds? What is the pre-tax cost of debt for the newly-issued bonds?

Rate of interest earned by fund assuming simple interest : Find the rate of interest earned by the fund assuming simple interest during the year.

Decide which project the company should accept : By computing and comparing the EAB of the two projects, decide which project the company should accept.

Calculate the npv of investment : Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. Calculate the NPV of this investment.

What are the expected and unexpected losses for the bank : What are the expected and unexpected losses (standard deviation) for the bank ?

Credit reserve equal to your expected credit loss : You have granted unsecured loan to company. If you are required to hold a credit reserve equal to your expected credit loss, how great reserve should you hold.

Decide of the optimal replacement cycle for the machine : By computing and comparing the EAC of the two replacement-cycles, decide of the optimal replacement cycle for the machine.

Minimum price in light of dividend payment logistics : What will be the expected minimum price in light of the dividend payment logistics?

User Account

All Pages