You are considering opening a new plant. The plant will cost $100 million upfront. After that, it

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You are considering opening a new plant. The plant will cost $100 million upfront. After that, it is expected to produce profits of $30 million at the end of every year. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 8%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

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Corporate Finance

ISBN: 9780134999463

5th Edition

Authors: Jonathan Berk, Peter DeMarzo

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