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You are thinking of making an investment in a new plant. Plant maintenance costs will start at $50,000 per year and will increase 5% per
You are thinking of making an investment in a new plant. Plant maintenance costs will start at $50,000 per year and will increase 5% per year there after. Assume that all revenue in maintenance costs occur at the end of the year. You intend to run the plant as long as it continues to make a positive cash flow (as long as the cashyou are thinking of making an investment in a new plant. A plant will generate revenues of $1 million per year for as long as you maintain it. You expect that the maintenance costs will start at $50,000 per year and will increase 5% per year there after. Assume that all revenue and maintenance costs occur at the end of the year. Do you intend to run the plant as long as it continues to make a positive cash flow (as long as the cash generates by the plan exceeds the maintenance costs) The plant can be built and become operational immediately. If the plant cost $10 million to build, and the interest-rate is 6% per year, she should invest in the plant?
The net present value (NPV) is ____ (round to the nearest dollar)
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