You are thinking of making an investment in a new factory. The factory will generate revenues of $1.71 million per year for as long as you maintain it. You expect that the maintenance costs will start at $97,470 per year and will increase 5% per year thereafter.

Assume that all revenue and maintenance costs occur at the end of the year.

You intend to run the factory as long as it continues to make a positive cash flow (as long as the cash generated by the plant exceeds the maintenance costs). The factory can be built and become operational immediately and the interest rate is 6% per year.

a. What is the present value of the revenues?

b. What is the present value of the maintenance costs?

c. If the plant costs $17.1 million to build, should you invest in the factory?