## (solution) FCF and NPV for a project: Midland Ltd is considering buying a

FCF and NPV for a project: Midland Ltd is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of \$11,750,000. The investment will consist of \$2,000,000 for land and \$9,750,000 for trucks and other equipment. The land, all trucks, and all other equipment are 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 \$1,400,000 each year, and an after tax annual cash flow from operations of \$1,260,000. The marginal tax rate is 35 percent, and the appropriate discount rate is 10.00 percent. NPV = \$

Total cash flow

before

depreciation =

(X2) Year

0

1

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10 \$

\$

\$

\$

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\$ 0

1,400,000.00

1,400,000.00

1,400,000.00

1,400,000.00

1,400,000.00

1,400,000.00

1,400,000.00

1,400,000.00...

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Sep 13, 2020

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