Question
You have been hired as a new analyst for a manufacturing firm that is planning a plant expansion in 8 years. Due to an unexpected
You have been hired as a new analyst for a manufacturing firm that is planning a plant expansion in 8 years. Due to an unexpected corporate tax windfall, the firm is planning to self-finance the expansion, assuming it can earn a sufficient rate of return. The firm has $3.75 million at its disposal today to invest for the anticipated $7.25 million dollar expansion 8 years from now. Once these funds are invested, it does not plan to add additional funds. What rate of return (interest rate) must the company obtain on the $3.75 million to have sufficient funds to make the $7.25 million dollar expansion 8 years from now?
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