Question
The following project assumes an interest rate of 12% yearly compounded monthly. The opening of a new manufacturing plant will cost $1million. The AOC is
The following project assumes an interest rate of 12% yearly compounded monthly. The opening of a new manufacturing plant will cost $1million. The AOC is estimated at 10% of the initial cost paid monthly. A major overhaul is predicted to occur every 10 years and cost $500,000. The projected project semi-annual revenues are $200,000 in the first 6 months and will grow forever at 1% per year. In addition, you expect a bumper sale (extra) of $10,000 per year starting in year 1 with an additional $1,000 increase per year for 20 years.
Find the NPV, EAA, and write out the formula for the IRR. Show your work making each step clear.
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