3-1 : We are considering spending 5 million on a new factory. It is producing a new product that we think will not be viable very long. We believe that the factory will generate after tax cash ow of 2 million in year one, 1.5 million in year two, and 3 million in year 3 including cost of dismantling the building and selling the land. The firm's WACC is 14%. Find the NPV. Should we build the factory? NPV = 2/(1+.14} + 1.5/{1+.14)"2 + 3/{1+.14}"'3 - 5 = -.D66498 No, should not purchase. 3-2: for the factory in 3-1, nd the IRR. Should we buy? IRR = 13.26%