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.

asked by Anonymous

14 years ago

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1 answer

npv=(1/1+r)*(c/r)-c0

1/1,08*30/0.08-100

answer: 247.22

answered by Anonymous

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Question

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.

1 answer

npv=(1/1+r)*(c/r)-c0

1/1,08*30/0.08-100

answer: 247.22

Ask a New Question or answer this question.

Anonymous · Answer

npv=(1/1+r)*(c/r)-c0 1/1,08*30/0.08-100 answer: 247.22