Question
A factor costs $540,000. You forecast that it will produce cash inflows of $170,000 in year 1, $230,000 in year 2, & $400,000 in year
A factor costs $540,000. You forecast that it will produce cash inflows of $170,000 in year 1, $230,000 in year 2, & $400,000 in year 3. The discount rate is 11%. A) What is the value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the factory= B) Is the factory a good investment? Yes or No?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To find the value of the factory well use the discounted cash flow DCF method which calculates the present value of all future cash inflows Then well compare this value to the initial cost of the factory to determine if its a good investment Lets calculate ...
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Step: 2
Step: 3
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Fundamentals of Corporate Finance
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
6th Canadian edition
1259024962, 978-1259024962
