Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A factory cost $93,000 to purchase.You believe (certain) that it will produce a cash inflow, net of all the costs, of $10,000 a year at

  1. A factory cost $93,000 to purchase.You believe ("certain") that it will produce a cash inflow, net of all the costs, of $10,000 a year at the end of each of each of the next 3 years and then is sold for $100,000, immediately after it returns its last cash inflow of $10,000. The opportunity cost of capital is 10 percent.

a. What is the net present value of the factory?Show work.

b. What will this factory be worth at the end of 2 years? (In other words, how much would you pay for it at year-end 2 if the applicable cost of opportunity was 10%?) Show work.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Engineering Economics

Authors: Chan S. Park

5th edition

136118488, 978-8120342095, 8120342097, 978-0136118480

More Books

Students also viewed these Finance questions

Question

Who should be involved?

Answered: 1 week ago