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Archer Daniels Midland Company

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Question;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 $12.20 million. This investment;will consist of $2.30 million for land and $9.90 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 $5.08 million, $2.00 million above book;value. The farm is expected to produce revenue of $2.10 million each year, and;annual cash flow from operations equals $1.96 million. The marginal tax rate is;35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV;of this investment. Should it be accepted or rejected?

 

Paper#44003 | Written in 18-Jul-2015

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