Part A
An ethanol processing facility costs $1000 to construct and will last for 20 years. It produces 100 units of ethanol a year for $5 per unit. If the interest rate is 10%, what is the net present value of this facility?
Part B
A different ethanol processing facility costs $10,000 to construct but instead will last forever. Every year (starting the year after construction), it produces 1000 units of ethanol at a price of $2 per unit. At what interest rate would an investor be indierent between constructing the facility and simply keeping the money? (The net present value would be equal to zero.)