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Fresh off the excitement of the 2012 London Olympic Games, youdecide that you want your firm to tak

Fresh off the excitement of the 2012 London Olympic Games, youdecide that you want your firm to tak

Fresh off the excitement of the 2012 London Olympic Games, youdecide that you want your firm to take advantage of the profits tobe made for the 2016 games in Rio de Jeneiro. To do so you plan toopen a factory in Brazil. After examining the idea, your CFOprojects revenues next year (2013) to be $17 million and costs tobe $8 million. Both of these are expected to grow at a rate of20.0% per year as the excitement for the games builds. Your firmfaces a 35% tax rate, a 12.5% discount rate and you can depreciateyour new investment using the straight line method over the fouryears leading up to the games, at which point the value of theventure moving forward will be $6 million. This $6 million is theafter-tax terminal value that is in year 4 (that is, 2016) dollarsand is the PV of all cash flows year 5 and beyond. The capitalexpenditure of this project is $11 million. What is the NPV of theproject? Assume that you have no significant working capitalcosts.