Calculate the npv of venture

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Reference no: EM133115310

Windstar Enterprises is considering a new business venture. You are the newly hired financial analyst who must examine the viability of this venture.

A number of windmills are to be constructed to generate electricity. They will cost a total of $400,00 and will last 10 years, at which time they will have an estimated salvage value of $25,000. However, a capital upgrade of $100,000 will be required at the end of five years.

It's expected to generate revenues of $150,000 per year for 10 years. The federal government will impose a new tax, which will cost the venture $7,500 a year. The new tax is deductible for tax purposes.

Additional information:

Tax rate                    25%

CCA Rate                   5%

Cost of Capital       20%

Required:

  1. Calculate the NPV of this venture
  2. Calculate the IRR of this venture
  3. Calculate the PI of this venture

Reference no: EM133115310

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