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The marketing department thinks the expansion will results an increase of $6,000,000revenue for the first two years, and $8,000,000 for the final three years. The operating costs for the first two years will be $2,000,000, and $3,000,000 for the final three years.  The firm needs to invest additional $1,000,000 NWC, which is expected to be recovered in the same amount after 5 years, for the new expansion.

The tax rate is 25%, and after-tax cost of capital for the firm is 7%, should the firm go for the expansion?

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