Description of this paper

Archer Daniels Midland Company is considering...

Description

Solution


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 $11.80 million. This investment will consist of $2.20 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 $5.27 million, $2.30 million above book value. The farm is expected to produce revenue of $2.09 million each year, and annual cash flow from operations equals $1.95 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 .

 

Paper#7186 | Written in 18-Jul-2015

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