You are considering opening a new plant. The plant will cost $100.0 million upfront and will...

 

Transcribed Image Text:

You are considering opening a new plant. The plant will cost $100.0 million upfront and will take one year to build. After that, it is expected to produce profits of $30.0 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 8.0%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule? You are considering opening a new plant. The plant will cost $100.0 million upfront and will take one year to build. After that, it is expected to produce profits of $30.0 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 8.0%. Should you make the investment? Calculate the IRR. Does the IRR rule agree with the NPV rule?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the investment opportunity we need to discount the expecte... View the full answer