Corporation X produces pens. The corporation is deciding whether to build a new plant, for...
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Corporation X produces pens. The corporation is deciding whether to build a new plant, for an initial investment of $100,000. The corporation projects to receive cashflows of $10,000 a year for 8 years by selling the output of the plant. Moreover, in year 9 the corporation could decide to convert the plant to produce a new product. The conversion would cost $8,000, and the new product would be sold for the following 40 years, with expected cash inflows per year of $30,000. The required rate of return for investments in pen production is 10% per year, while the one for investments in the production of new products is 15% per year. Say that you must commit to your decisions today. What would you do today and in year 9? How much value can be generated by the plant?
(answer question using detail excel formatting)
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