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LVMC Auto is planning to its expand its productive capacity by building a new plant The firm

 LVMC Auto is planning to its expand its productive capacity by building a new plant. The firm anticipates that the plant will require an initial investment of $2 million in net working capital today. The plant is expected to last 10 years, at which time the full investment in net working capital will be recovered. Assuming that the firm's cost of capital is 6%, what is the Net Present Value (NPV) of this working capital investment? Note: • Do not use the $ to enter your answer. • Round your answer to the nearest dollar. For example, $38,559.85 should be entered as 38,560

4.The projected Net Income and Free Cash Flows (FCF) next year for CMRC Enterprises are as follows: Net Income : $25,000,000 Add: Depreciation: $4,000,000 Less: Capital Expenditures ($4,000,000) Less: Increases In Working Capital: ($2,000,000) Free Cash Flows (FCF) $23,000,000 The company expects capital expenditures and depreciation to continue to offset each other, and both Net Income and Increases in Working Capital to grow at 5% annually. The company's cost of capital is 10%. If CMRC were able to reduce its annual increase in working capital by 20% by managing its working capital more efficiently, holding everything else constant, what would be the firm's value after this reduction in the annual increase in working capital?

Feb 08 2020 View more View Less

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