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CFO of Lucky Light is considering to extend the current factory with a cost of IDR 300 million. With this extension, the production of its
CFO of Lucky Light is considering to extend the current factory with a cost of IDR 300 million. With this extension, the production of its product increases by 5% per year. The current production is 20 thousand units at the selling price of IDR 5,000 per unit. With the extension, the average costs will be 25% of the revenue. The investment horizon is 5 years. How much is the value created by the extension plan if the discount rate is 12% ? Will the CFO accept the extension plan ? (15 points)
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