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Explain briefly what is wrong with the following reasoning. My firm built a new plant two years ago with an investment of $100 million, which
Explain briefly what is wrong with the following reasoning.
My firm built a new plant two years ago with an investment of $100 million, which had an expected present value of $150 million, considering the plant's future cash flows. Today, it has become apparent that the product manufactured at the plant is not selling as well as expected. The present value of future cash flows at that point is now only worth $50 million. My firm would therefore be shutting down the plant because the net present value is now negative.
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