You are thinking of making an investment in a new factory. The factory will generate revenues of $1,110,000 per year for as long as you maintain it.
You expect that the maintenance costs will start at $58830 per year and will increase 5% per year thereafter. Assume that all revenue and maintenance costs occur at the end of the year. You intend to run the factory as long as it contrinues to make a positive cash flow ( as long as the cash generated by the plant exceeds the maintainenance costs).
The factory can be built and become operational immediately and the interest rate is 6% per year.
a/ what is the present value of the revenues
b/ what is the present value of the maintenance costs?
c/ if the plan costs $11,100,000 to build, should you invest in the factory?
You are thinking of making an investment in a new factory.
The factory will generate revenues of 0,000 per year for as long as you maintain it.
You expect that the maintenance costs will start at $58, 830 per year and will increase 5% per year thereafter, Assume that all revenue and maintenance costs occur at the end of the year, You intend to run the factory as long as it continues to make a positive cash flow (as long as the cash generated by the plant exceeds the maintenance costs).
The factory can be built and become operational immediately and the interest rate is 6% per year. What is the present value of the revenues?
What is the present value of the maintenance costs? If the plant costs $11, 100,000 to build, should you invest in the factory?