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Plant cost 100 million upfront to build . Produce profits of 30 million. The cash flow are expected to last forever. NPV of this investment; cost of

Plant cost 100 million upfront to build .
Produce profits of 30 million.
The cash flow are expected to last forever.
NPV of this investment; cost of capital is 8%.
Should you an investment?
Calculate the IRR and use it to determine the maximum deviation allow in the cost of capital estimate to leave the decision unchanged.

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516782_FIN.xls

Plant cost (in millions)
-100
Annual profits ( in millions)
30
Cost of capital
8%
PV of cash inflows
375
NPV
275
As NPV of the project is positive, the investment should be made.
IRR of the...

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