Question: PLEASE ANSWER IN THE NEXT 35 MINS OR DONT BOTHER ANSWERING You are thinking of making an investment in a new factory. The factory will
PLEASE ANSWER IN THE NEXT 35 MINS OR DONT BOTHER ANSWERING
You are thinking of making an investment in a new factory. The factory will generate revenues of $1,630,000 per year for as long as you maintain it. You expect that the maintenance costs will start at $92,910 per year and will increase 4% 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 5% 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 $16,300,000 to build, should you invest in the factory? a. What is the present value of the revenues? The present value of the revenues is $. (Round to the nearest dollar.)
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