Question
The Houston American Cement plant may generate a revenue base of $50 million per year. The president of the Brazilian parent company Votorantim Cimentos may
The Houston American Cement plant may generate a revenue base of $50 million per year. The president of the Brazilian parent company Votorantim Cimentos may have reason to be quite pleased with this projection for the simple reason that over the 5-year planning horizon, the expected revenue would total $250 million, which is $50 million more than the initial investment. With money worth 10% per year, address the following question from the president: Will the initial investment be recovered over the 5-year horizon with the time value of money considered? If so, by how much extra in present worth funds? If not, what is the equivalent annual revenue base required for the recovery plus the 10% return on money?
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