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Unformatted text preview: We can solve for the necessary OCF that will give the project a zero NPV. The equation for the NPV of the project is: NPV = 0 = $50,000 30,000 + OCF(PVIFA 10%,3 ) + [($30,000) / 1.10 3 ] Solving for the OCF, we find the OCF that makes the project NPV equal to zero is: 3 57,460.55597 23,105.74018 N I/Y PV PMT 10 OCF = 23,105.74018 Or algebraically: OCF = $57,460.55597 / PVIFA 10%,3 = $23,105.74018 The easiest way to calculate the bid price is the tax shield approach, so: OCF = $23,105.74018= [(P Costs ](1 tc) + tcD $23,105.74018= [(P $25,000 ](1 0.35) + 0.35($50,000/3) P = 5.15729336 Bid P = $5.16 Notes: none...
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 Spring '08
 LAPLANTE
 Corporate Finance

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