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A firm is evaluating an investment in a fleet of vehicles that will be used for 1 0 years. The vehicles would cost $ 7
A firm is evaluating an investment in a fleet of vehicles that will be used for years. The vehicles would cost $ million. According to the IRS, the useful life of these vehicles is years, and the firm will depreciate them using straight line depreciation. The firm expects to generate additional revenue of $ million per year using these vehicles. At the same time, the firm expects to pay approximately $ million maintaining them. However, the firm anticipates being able to utilize them to aid in other endeavors, saving approximately $ million per year. At the end of the year period, the firm expects to be able to sell the vehicles for $ million. The company pays taxes at a rate. The firm anticipates that its cash needs will increase with the vehicles in use, so it plans to keep an additional $ million in cash for the next years. What is the NPV of this investment if the firm has a cost of capital?
I am told the correct answer is million, can you explain how to get this answer?
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