Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:You are considering opening a new plant. The plant will cost $100.3 million up front and will take one year to build. After
that it is expected to produce profits of $29.8 million at the end 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 7.2%. 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 $ million. (Round to one decimal place.)
make the investment. (Select from the drop-down menu.)
You
The IRR is%. (Round to two decimal places.)
The maximum deviation allowable in the cost of capital estimate is%. (Round to two decimal places.)
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