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You are considering opening a new plant. The plant will cost $100 million upfront. After that, it is expected to last forever.

You are considering opening a new plant. The plant will cost $100 million upfront. After that, it is 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.

This question was asked on Apr 24, 2010.

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