Question
JASCO Company decided to build its COVID-19 vaccine plant in El Paso, TX. The plant will start production at the beginning of year 2023 and
JASCO Company decided to build its COVID-19 vaccine plant in El Paso, TX. The plant will start production at the beginning of year 2023 and it is estimated that the plant will generate a net profit of $1 million every year for the estimated 10 years life of the plant upon which JASCO company will scrap the plant and sell the property for 10% of the capital cost of the original cost of building the plant. If the capital cost of building the plant is $10 million and the minimum acceptable rate of returns for borrowing money from the bank to build the plant is 15% calculate: (a) the net present worth of the plant, and (b) from your results in (a) do you think that the executive of JASCO company made a good decision to build the plant? Make sure you include a cash flow diagram for this investment.
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