Question
You are considering opening a new plant. The plant will cost $ 95.9 million upfront. After that, it is expected to produce profits of $
You are considering opening a new plant. The plant will cost $ 95.9 million upfront. After that, it is expected to produce profits of $ 28.9 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.1 % . Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. Question content area bottom Part 1 Calculate the NPV of this investment opportunity if your cost of capital is 7.1 % . The NPV of this investment opportunity is $enter your response here million. (Round to one decimal place.) Part 2 Should you make the investment? (Select the best choice below.) A. Yes, because the project will generate cash flows forever. B. Yes, because the NPV is positive. C. No, because the NPV is less than zero. D. No, because the NPV is not greater than the initial costs. Part 3 Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR of the project is enter your response here %. (Round to two decimal places.) Part 4 The maximum deviation allowable in the cost of capital is enter your response here %. (Round to two decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started