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2. As shown in the table below a construction company invests $80 million for 2 years to build a new plant, and it requires payment
2. As shown in the table below a construction company invests $80 million for 2 years to build a new plant, and it requires payment of $20 million annually thereafter in maintenance and support costs. From this investment, the company expects a revenue of $75 million each year for 4 years. The weighted average cost of capital (WACC, also called i) is 5% Year 0 -80 Year 1 -80 Year 2 -20 Year 3 -20 Year 4 -20 Year 5 -20 Costs Revenues 75 75 75 75 Present the equations and calculate: (a) Pay back time (PBT) undiscounted (b) Pay back time (PBT) discounted (c) Net Present value (NPV) (d) Internal Rate of Return (IRR) (e) On the basis of the aforementioned results explain why the company should do or should not do the project
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