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Use the information for the question(s) below. You own a small manufacturing plant that currently generates revenues of $2 million per year. Next year, based
Use the information for the question(s) below. You own a small manufacturing plant that currently generates revenues of $2 million per year. Next year, based upon a decision on a long-term government contract, your revenues will either increase by 20% or decrease by 25%, with equal probability, and stay at that level as long as you operate the plant. Other costs run $1.6 million per year. You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%. If you are awarded the government contract and your sales increase by 20%, then the value of your plant will be closest to: A. $4 million. B
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