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Gardenia Bread put forth its expansion plan, in which they are considering building a new plant. The proposed plant will require an initial investment of
Gardenia Bread put forth its expansion plan, in which they are considering building a new plant. The proposed plant will require an initial investment of RM 95.8 million and will take at least one year to build. Upon its operation, it is expected to produce cash inflows of RM31.5 million at the end of each year of production. These cash flows are expected to last forever. Compute the NPV of this plant investment if Gardenia cost of capital is 7.4%. Should Gardenia make the investment? Calculate also the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged
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