Company’s Major Capital Expenditure

Company’s Major Capital Expenditure

Instructions/Descriptions

Company’s Major Capital Expenditure

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Question Description

You have been asked to help a local company evaluate a major capital expenditure. The company is a new internet company and must buy a large computer system which will generate additional revenue. The company provides you with the following information:[Order Now]

Requirement:

Write a letter to the president of the company explaining whether the company should acquire the computer system, using NPV.

Assume that the initial $81,000,000 in annual revenues will grow at a 10% annual rate and that the initial $35,000,000 in annual expenses will grow at a 75% annual rate. The growth starts in year 2 from year 1, i.e. the revenue is year 2 is 89,100,000, etc. Working capital is released at the end of the project.[Order Now]

Company’s Major Capital Expenditure

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