Question 4 PrimeX is considering a new facility costing $15 million upfront and it will produce incremental new cash flows of $2 million per year for the next 14 years. PrimeX owns the land where it intends to build the facility. The company already spent $1 million to excavate this land and prepare it for development. Rather than going forward, PrimeX has a offer from a competitor to purchase the land for a net cash flow of $3 million. If PrimeX's required return is 9.8%, should it build the plant? How much value does this project create (or destroy) in present value terms? O No, destroys $4.10 mil Yes, creates $0.88 mil 10 pts O Yes, creates $1.10 mil O No, destroys $3.10 mil

PrimeX is considering a new facility costing $15 million upfront and it will produce incremental new cash flows of $2 million per year for the next 14 years. PrimeX owns the land where it intends to build the facility. The company already spent $1 million to excavate this land and prepare it for development. Rather than going forward, PrimeX has a offer from a competitor to purchase the land for a net cash flow of $3 million. If PrimeX's required return is 9.8%, should it build the plant? How much value does this project create (or destroy) in present value terms? No, destroys $4.10mil Yes, creates $0.88mil Yes, creates $1.10mil No, destroys $3.10mit