You are considering opening a new plant. The plant will cost $102.2 million upfront and will...

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You are considering opening a new plant. The plant will cost $102.2 million upfront and will take one year to build. After that, it is expected to produce profits of $30.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.5%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? ….. Here is the cash flow timeline for this problem: Years 0 1 Calculate the IRR. 2 Cash Flow ($ million) - 102.2 Calculate the NPV of this investment opportunity if your cost of capital is 8.5%. The NPV of this investment opportunity is $225.3 million. (Round to one decimal place.) Should you make the investment? (Select the best choice below.) 30.2 A. No, because the NPV is less than zero. B. Yes, because the project will generate cash flows forever. C. No, because the NPV is not greater than the initial costs. D. Yes, because the NPV is positive. 3 The IRR of the project is 29.55 %. (Round to two decimal places.) 4 30.2 30.2 You are considering opening a new plant. The plant will cost $102.2 million upfront and will take one year to build. After that, it is expected to produce profits of $30.2 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8.5%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? ….. Here is the cash flow timeline for this problem: Years 0 1 Calculate the IRR. 2 Cash Flow ($ million) - 102.2 Calculate the NPV of this investment opportunity if your cost of capital is 8.5%. The NPV of this investment opportunity is $225.3 million. (Round to one decimal place.) Should you make the investment? (Select the best choice below.) 30.2 A. No, because the NPV is less than zero. B. Yes, because the project will generate cash flows forever. C. No, because the NPV is not greater than the initial costs. D. Yes, because the NPV is positive. 3 The IRR of the project is 29.55 %. (Round to two decimal places.) 4 30.2 30.2

Answer rating: 100% (QA)

Intial cash outflow 10220 Cash inflow from year 2 3020 Cost of capital 850 If discount rate 2350 240... View the full answer