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What is the NPV of the project

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Question - Elmer Fudd Bros. is thinking of setting up a plant making canned rabbit stew. The initial investment is $1 million which is depreciated over the 10-year life of the plant on a straight-line basis.   Fudd management will close the plant down in 10 years. The plant has a salvage value of $300,000 at that time. Working capital required is $350,000, which also must be invested up front but will be recovered when the plant closes. Revenues minus costs (not including depreciation) are $200,000 each year. The tax rate is 33.3%. What is the NPV of the project if the discount rate is 10%.

Reference no: EM133104584

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