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A new plant to produce steel tubing requires an initial investment of $10 million. It is expected that after three years of operation an
A new plant to produce steel tubing requires an initial investment of $10 million. It is expected that after three years of operation an additional investment of $5 million will be required; and after six years of operation, another investment of $3 million. Annual operating costs will be $3 million and annual revenues will be $8 million. The life of the plant is 10 years. If the interest rate is 15% per year, compounded annually, what is the NPV of this plant? Also determine the viability of this business proposition using B-C-D Method?
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