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You are considering opening a new plant. The plant will cost$100 million upfront and will take one year to build.

You are considering opening a new plant. The plant will cost$100 million upfront and will take one year to build. After that, it is expected to produce profits of $30 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 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

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Cost of new plant: $100 million Expected cash flow: $ 30 million Cost of capital 8% Assumption: Let the cash flow... View the full answer

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