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What is the factory worth today

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Question - A factory costs $1,000,000 to build. You determine that it will produce cash for 10 years with an inflow of $230,000 a year for the first five years and an inflow of $170,000 a year for last five years. Suppose the interest rate is 10 percent.

What is the factory worth today? Should you build the factory?

After five years, you are offered $600,000 to sell the factory. Should you sell it? [Hint: You must compare $600,000 with the factory's true value after five years.]

Reference no: EM132816302

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