Primary Case: Basic Industries

A$.$ Throughout our work with Basic Industries, we will assume that the decision to locate Toranium production in Chicago has been made, and that our task is to recommend the plant capacity strategy.

B$.$ Be sure to incorporate information from the Basic Industries Additional Information document where appropriate.

Your goal is to find the total value of the strategy to build a small $($ $$12\mathrm{.}5$ million capacity$)$

Toranium plant now and decide whether to expand the plant to $$28$ million of capacity in $2000?$

Calculate the NPV of the expansion. Use the Problem $1$ tab in the Excel file and report the value here.

Calculate the real option value of waiting to expand. Use the Problem $2$ tab in the Excel file and report the value here.

RO Value

Add together all sources of value for this Toranium capacity strategy to find the total value of this approach. Use the Problem $3$ tab in the Excel file and report the value here.

Total Value