Compute the net present value for this investment

Assignment Help Accounting Basics

Reference no: EM132720497

Question - There is a debate in the senior management team of MXM on the proposal of building the plant, where several senior managers oppose the idea. Their main argument is that the proposed location of the plant is too near to a river. They are concerned that the chemical waste from the plant might contaminate the water in the river which is the main source of raw water for 1,292 areas in seven districts with 1.2 million people. Therefore, additional investment might be needed to identify methods to dispose of the waste produced by the plant.

What would be your response to this issue? Should MXM build the plant?

The MXM is thinking of building a plant. The cost of building the plant is estimated at $1,000,000 and is expected to save the cost of using the third party disposal facility of $220,000 per year. The building is estimated to have a useful life of 10 years, and it will have zero disposal value. The required rate of return is 12%.

Compute the net present value for this investment. Would you recommend MXM to build the plant?

Reference no: EM132720497

Questions Cloud

What is Zelda recognized gain or loss on the sale : Zelda purchased land on 3/1/2000 for $200,000. Prior to netting any gains and losses, what is Zelda's recognized gain or loss on the sale of the land

Calculate estimated cost of the destroyed ending inventory : Teigan's Clothiers Inc., a clothing retailer of high-end ladies fashions, had their inventory destroyed in a flood. Its average gross profit percentage is 31%.

Unique strategic challenges that christian universities face : What are some of the unique strategic challenges that Christian universities face?

Developing products and services : Which product dimensions are of the greatest and least importance? Do you feel that suppliers should be included in the development process?

Compute the net present value for this investment : The building is estimated to have a useful life of 10 years, and it will have zero disposal value. Compute the net present value for this investment

Describe the regulation process for accounting firms : Describe the regulation process for accounting firms that audit (A) public companies and (B) non-public companies

Stochastic process with probability distribution model : We can often capture the most relevant characteristics of a stochastic process with a simple probability distribution model.

Prepare the necessary general journal entry : Prepare the necessary general journal entry(ies), if any, to revalue the equipment as at December 31, 2020, using the asset adjustment method

Traditional powerhouse corporation in the industry : Choose an industry. Contrast a traditional powerhouse corporation in the industry, to a very new, upstart entity.

User Account

All Pages