9. The A Corporation is considering the construction of a new plant to build a component...

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9. The A Corporation is considering the construction of a new plant to build a component part that it is currently purchasing. It has the following information. Item Cost Expected life Plant Utilities $20,000,000 40 years 10,000,000 20 years Equipment 15,000,000 10 years The operating costs are estimated at $5 million per year, assuming an output of 1 million units of product per year. The corporation uses a discount rate of 0.05. It can purchase the product at a cost of $10 per unit. Should the new plant be built (on a straight economic basis)? 1 9. The A Corporation is considering the construction of a new plant to build a component part that it is currently purchasing. It has the following information. Item Cost Expected life Plant Utilities $20,000,000 40 years 10,000,000 20 years Equipment 15,000,000 10 years The operating costs are estimated at $5 million per year, assuming an output of 1 million units of product per year. The corporation uses a discount rate of 0.05. It can purchase the product at a cost of $10 per unit. Should the new plant be built (on a straight economic basis)? 1