# FIN 571 Question (Finance 571) - 52359

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## MR2Spyder

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Price: \$16.00
• From: Finance,
• Posted on: Thu 27 Mar, 2014
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Request Description

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 \$11.90 million. This investment will consist of \$2.30 million for land and \$9.60 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 \$5.14 million, \$2.39 million above book value. The farm is expected to produce revenue of \$2.01 million each year, and annual cash flow from operations equals \$1.82 million.

The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent.

Calculate the NPV of this investment.

(Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

 NPV \$

 The project should be acceptedrejected .

Solution Description
1. Cost/Expenses: 11.90 \$ mill

2)Sale price after 10 years