Questionarcher daniels midland company is considering

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Reference no: EM13348516

Question:

Archer Daniels Midland Company is considering purchasing a new farm that it plans to operate for 10 years. The farm will need an initial investment of $11.90 million. This investment can 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 $5.12 million, $2.45 million given book value. The farm is expected to generate revenue of $2.05 million each year, and annual cash flow from operations equals $1.86 million. The marginal tax rate is 35 percent, and the suitable discount rate is 9 percent. Determine the NPV of this investment.

Reference no: EM13348516

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