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t=0

t=1

t=2

t=3

t=4

Project CF

(8,000,000)

3,500,000

3,500,000

3,500,000

6,500,000

NPV (at 4.5%)

7,072,024

t=0

t=1

t=2

t=3

t=4

Total CF

0

3,140,000

3,140,000

3,140,000

(1,860,000)

NPV (at 4.5%)

7,072,024

t=0

t=1

t=2

(t=3

t=4

Fin. Rel. CF

8,000,000

(360,000)

(360,000)

(360,000)

(8,360,000)

NPV (at 4.5%)

0

Assuming that financing totally comes from debt, and the before-tax

cost of capital is 6%, tax rate 25%, so the after-tax cost of capital 4.5%.

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