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ABC manufacturing decides to build a new plant, which will cost $2 million immediately and is expected to have a useful life of 10 years.
ABC manufacturing decides to build a new plant, which will cost $2 million immediately and is expected to have a useful life of 10 years. At the end of 5 years a renovation expense of $X will be required to install new technology. The plant will produce level returns of $300,000 at the end of each year for the first 5 years and $500,000 at the end of each for the second 5 years. Find the maximum value of X that ABC would still produce an internal rate on this investment of at least 10%.
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