Question
You own factory A and factory B. The next cash flow for each factory is expected in 1 year. Factory A has a cost of
You own factory A and factory B. The next cash flow for each factory is expected in 1 year. Factory A has a cost of capital of 4.3 percent and is expected to produce annual cash flows of $19,100 forever. Factory B is worth $455,000 and is expected to produce annual cash flows of $18,800 forever. Which assertion is true?
| a. | Factory A is more valuable than factory B and factory A is more risky than factory B | |
| b. | Factory A is more valuable than factory B and factory B is more risky than factory A | |
| c. | Factory B is more valuable than factory A and factory A is more risky than factory B | |
| d. | Factory B is more valuable than factory A and factory B is more risky than factory A | |
| e. | Factory A and factory B either have the same value, the same level of risk, or both the same value and level of risk. |
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Production And Operations Analysis
Authors: Steven Nahmias, Tava Lennon Olsen
7th Edition
1478623063, 9781478623069
