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Question 2 From a project we could expect to obtain net revenues of $650,000 per year for at least the next 10 years, if we

Question 2

From a project we could expect to obtain net revenues of $650,000 per year for at least the next 10 years, if we adapt our production line, in order to produce some new parts. Considering this situation

  1. What is the maximum that we should invest on this project if we consider a cost of capital of 4%?
  2. If this project required an initial investment of $4,000,000, what would be its NPV consider a cost of capital of 4%?
  3. What is its payback period given that the initial investment is $4,000,000?

Question 3

Considering that our plant produces annual revenues of $260,000 decreasing at a 1,2% annual, and it is expected to last for a very long time.

  1. For how would investors buy the plant if they wanted to obtain a profitability of at least a 6%?

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