Tohmer Inc. is considering building a new manufacturing plant. Plant A has state-of- the-art equipment and...
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Tohmer Inc. is considering building a new manufacturing plant. Plant A has state-of- the-art equipment and will cost $50 million and provide cash flows of $8 million per year for 20 years. Plant B is less efficient and will cost $15 million and provide cash flows of $3.4 million per year for 20 years. The cost of capital is 9.2 %. Calculate the NPV and the IRR for each plan. Hint: calculate the PV of the cash flows and subtract CFO to get NPV. Use NPV to calculate IRR. Which plant would you choose? Why? Tohmer Inc. is considering building a new manufacturing plant. Plant A has state-of- the-art equipment and will cost $50 million and provide cash flows of $8 million per year for 20 years. Plant B is less efficient and will cost $15 million and provide cash flows of $3.4 million per year for 20 years. The cost of capital is 9.2 %. Calculate the NPV and the IRR for each plan. Hint: calculate the PV of the cash flows and subtract CFO to get NPV. Use NPV to calculate IRR. Which plant would you choose? Why?
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Answer rating: 100% (QA)
Answers NPV of Plant A 2199935304 NPV of Plant B 15... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
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