Question
Digital Healthcare Co., a mid-size electronic medical device maker, has decided to downsize as a measure to reduce cost in response weak demand. The company
Digital Healthcare Co., a mid-size electronic medical device maker, has decided to downsize as a measure to reduce cost in response weak demand. The company is considering implementing one of two plans:
the first plan involves closing and selling a manufacturing plant in Maple Ridge, which is expected to generate a salvage value of $5 million today (year 0) and save $1.5 million annually in cost and expenses over the next 10 years (years 1 to 10). However, the company will lose $1 million in revenue the first year (year 1), and the loss will increase by 10% per year over the following 9 years (years 2 to 10).
NPV Plan A = $____ million
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