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Your company is investigating the option to build a new chemical production unit in your plant. The total cost to build the new unit will

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Your company is investigating the option to build a new chemical production unit in your plant. The total cost to build the new unit will be $2,000,000 which will be paid at the end of the 12 month construction period which will start today. Once the 12 months has elapsed, you will start the new unit up immediately and begin making product. Each year the plant operates you must take a charge for expenses for raw materials and labor costs at the beginning of each production year in the amount of $200,000. At the end of each year of production you can sell the product and take a credit for the sale of $700,000. It is expected that the new unit will only operate for 6 years of production and then it will have to be shut down. When it is shut down, the company can take an additional credit of $200,000 for selling the scrap metal and equipment from the unit when it is decommissioned. Assume your company requires an effective rate of return on its investments of 10% (i.e. you can use a yearly interest rate of 10% in your finantial analysis where needed). What is the correct value for D1 that should be entered into the cash flow table below to represent this project (rounded to nearest hundreth)? Year Cash Flow Discount Factor Present Value 0 CO DO PO 1 C1 D1 P1 C2 D2 P2 wN C3 D3 P3 4 C4 D4 P4 5 C5 D5 P5 6 C6 D6 P6 analysis where needed). What is the correct value for D1 that should be entered into the cash flow table below to represent this project (rounded to nearest hundreth)? Year Cash Flow Discount Factor Present Value 0 DO PO 1 C1 D1 P1 C2 D2 P2 AWN C3 D3 P3 C4 D4 P4 5 C5 D5 P5 6 C6 D6 P6 7 C7 D7 P7 8 C8 D8 P8 None of these answers is correct. 0.75 O 0.91 1.00 0.83

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