Calculate the revenue - operating cost, Financial Management

Chrysler decides to avoid the problems associated with exporting autos to Japan by building a plant in Japan. The cost is expected to be $1 billion with $500 million to be spent now and the remaining to be spent at the end of year 3. The plant will be placed in service on January 1 of year 4 and will be in operation, once placed in service, for a total of 30 years. During its 30 years of operations, operating costs are expected to be $150 million each year. Salvage value will be negligible. How much revenue must this plant generate annually during its 30-year operating life to cover all costs, i.e. the cost of building the plant and operating costs? Chrysler uses a 10% required return. Assume no taxes for this analysis.

Posted Date: 3/2/2013 3:06:04 AM | Location : United States

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