Compute the net present worth

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Reference no: EM13883510

A firm is undertaking a project with the following details provided.

-The project costs $2.5 million and has a five-year service life.

-The project is classified under a seven year property under the MACRS rule.

-At the end of the fifth year, any assets held for the project will be sold. The expected salvage value will be 10% of the initial project cost.

-The firm will finance 40% of the project money from an outside source with an interest rate of 10%. The firm is required to repay the loan with five equal annual payments.

-The firm’s incremental marginal tax rate is 35%

-MARR is 15%

-Given the information,

Determine the end of year cash flows for years 0 through 5?

Compute the Net Present Worth for this 5-year project?

Please show work

Reference no: EM13883510

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