Based on your answer for 1b above should the company buy

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Reference no: EM13581524

Company VGG is thinking of buying a factory to meet the growing demand for its products. The following is the financial data regarding this proposal.

Cost of the factory today $20 million
Annual cash flow $2 million
Life of the factory 15 years
Cost of capital 8%
CALCULATE THE FOLLOWING:
Payback period in years
Net present value.

Based on your answer for 1.b above, should the company buy this factory? Why or why not?Now assume that after 15 years, the factory can be sold for $12 million. What is the net present value?

Reference no: EM13581524

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