You are considering opening a new plant. The plant will cost $101.3 million up front and will take one year to build. After that it is expected to produce profits of $30.5 million at the en 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 8.6%. 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. The NPV of the project will be $ 225.3 million. (Round to one decimal place.) You should make the investment. (Select from the drop-down menu.) The IRR is %. (Round to two decimal places.)

You are considering opening a new plant. The plant will cost $101.3 million up front and will take one year to build. After that it is expected to produce profits of $30.5 million at the en 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 8.6%. 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. The NPV of the project will be $ 225.3 million. (Round to one decimal place.) You should make the investment. (Select from the drop-down menu.) The IRR is %. (Round to two decimal places.)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 17.1IP

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